Vol. VII No. 6 June 2009 The first monthly magazine on ICT4D
Microfinance: Leveraging ICTs
ICTs for Microfinance
One billion opportunities
Banking the Unbanked Globally
Information for development
Microfinancing Ghana
w w w. i 4 d o n l i n e . n e t
Microfinance Sector in Ghana
Microfinance :
The Road to Self-sufficiency
ICTs and Microfinance
ISSN 0972 - 804X
knowledge for change

Contents Vol. VII No. 6 June 2009
Mail box
Features Rendezvous
5 Editorial et
Fueling the growth 43 Global Conference on
Financing the Poor: Moving info@i4d
online.n
Beyond Inclusion, 29 December,
ICTs for Microfinance
6 Microfinance: Leveraging ICTs 2009, New Delhi, India
Sabyasachi Kashyap Exploring the impact of microfinance
Dinoj Kumar Upadhyay
Banking the Unbanked Globally
12 One billion opportunities
The i4d magazine is an extremely useful
resource for those of us who are practitioners
Gautam Bandyopadhyay Interview in the field of ICT for D. It is well produced,
and has informative and enlightening content
16 Microfinance in India
Microfinance: A bigger picture 10 Rita Soni,
Senior Vice-President,
which is very helpful for us to keep up with
changes and developments in the field. Many
Ritu Srivastava congratulations to the team!
YES BANK
Inclusion through Prashant Sharma
Microfinance Sector in Ghana innovation Deputy Executive Secretary and
19 Microfinancing Ghana Communications Manager
Veronica Agodoa Kitti Mountain Forum Secretariat, ICIMOD,
Nepal
Accounting System in Orissa Columns prashant@mtnforum.org
26 Panchayats
e-Cashbook in Orissa panchayats
I have been reading the two previous issues
of your magazine and found them really very
Shreemanta Kumar Samal,
Sanjay Prakash Sahoo
45 What’s on
informative. I would like to thank your team
for such a valuable magazine on ICT4D.
In Fact
46 Microfacts about microfinance
Mahendranath Busgopaul
Internet Child Safety Foundation, Mauritius
29 Microfinance and Gender Equity
Money for women by women mahen@icsfonline.org
Ritu Srivastava
I take this opportunity to thank for the whole
i4d team for the wonderful edition of the
ZERO MASS Foundation
32 Development initiatives
community multimedia Gender and ICTs.
Loknath Panda
Snapshots of Hara Padhy
UNESCO, Paris
Best Microfinance Institutions microfinance
34 Forbes magazine’s top 50 MFIs solutions
h.Padhy@unesco.org
I have been very regularly getting i4d issues.
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FAO-GTZ Microbanking System
40 Technology for microfinancing
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Editorial
Fueling the growth
Now that it has been widely accepted that microfinancing
does not have to be an enterprise that runs on a not-for-
profit basis, the challenge that faces us today is to make
Advisory Board
microfinance more accessible, customised, and effective
Dr M P Narayanan, Chairman, i4d while ensuring sustainable growth of the sector as a whole.
Chin Saik Yoon
Southbound Publications, Malaysia
Karl Harmsen
It has been rightly said that sound microfinancing strategies have the
United Nations University potential to alleviate global poverty. But to do so, we have to find ways
Kenneth Keniston to reach the millions of unbanked and under-banked households
Massachusetts Institute of Technology, USA
who desperately need this support to get out of poverty and stay above the poverty line.
Nagy Hanna
e-Leadership Academy, University of Maryland, USA
Richard Fuchs
Several questions need to be answered and a similar number of challenges have to be
IDRC, Singapore overcome to reach our goals. With the aid of modern ICT tools it is possible to reach the last
Walter Fust mile and also serve the population living in remote areas. But technology is just one of the
Global Humanitarian Forum, Switzerland
components of this intervention with connectivity taking the lead among the related loops
Wijayananda Jayaweera
UNESCO, France that need to be closed, apart from the capacity building needs for the population to be served.
EDITORIAL BOARD
Equally important is the creation of enabling policies that allow and, if required,
Akhtar Badshah, Frederick Noronha
incentivize the setting up of Microfinance Institutions (MFIs). Also imperative is strong
EDITORIAL TEAM regulation and monitoring of these MFIs to curb the incidences of MFI operators
Editor-in-Chief Dr Ravi Gupta running away with the savings of their victims. Since the target demography has
Assistant Editor Sandeep Budki
probably never been exposed to banking services, they also require financial education.
Research Assistant Subir Dey
Sr. Graphic Designer Bishwajeet Kumar Singh
None of these issues can be taken in isolation and have to go hand in hand to provide
Graphic Designers Om Prakash Thakur, Shyam Kishore
succour from poverty to the disadvantaged citizens of the world.
Web Programmer Zia Salahuddin
i4d
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Email info@i4donline.net Web www.i4donline.net organisations and government agencies are combating poverty through financial inclusion
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with an eye on gender equity. We hope you find this issue informative and thought
provoking enabling us all to find new ways to meet the challenges that lie ahead.
i4d is a monthly publication. It is intended for those interested and
involved in the use of Information and Commnication Technologies
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i4d does not necessarily subscribe to the views expressed in this
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Dr Ravi Gupta
Ravi.Gupta@csdms.in
Centre for Science, Development and
Media Studies, 2008
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June 2009 | www.i4donline.net 5

ICTS FOR MICROFINANCE
Microfinance:
Leveraging ICTs
This article suggests Over the last decade or so, the world
seemed to have woken up to the reality
and fund transfers. In the last few years of its
existence, many organisations have jumped
the ways through that to empower the rural marginalised
communities and to alleviate the poverty
onto the microfinance bandwagon which
includes not-for profit NGOs, development
which the existing scenario in the world, they need to be
given opportunities to save, borrow and
professionals, corporates, commercial
banks, international donor agencies, etc.
ICT tools and repay loans. Till a few years back, banking
institutions, for the purpose of offering
The reasons for the enthusiasm varies from
the belief that microfinance offers a good
technologies can banking services to the marginalised,
experimented with subsidised credit
developmental alternative to the belief,
especially among the commercial banks,
bring the poorer which affected the overall performance
of the banks and contributed to the rise
who have opened microfinance branches
for their microfinance operations, that
section of the in Non-Performing Assets (NPA). Thus
subsidised credit as an option gradually
microfinance offers a good, sound banking
option. The government has also routed
society in the ambit lost its popularity among banks. Moreover
more than the cost of credit, it was access
various developmental schemes through
microfinance. Microfinance leaders are
of the microfinance to credit which was considered as the
major barrier for the poor. With little or no
gaining prominence and it is said that
some of the leaders, particularly women,
services means to afford the collaterals/mortgages,
the poorer section of the society had to
have been taking a more active role in
other social spheres, including contesting
resort to unscrupulous moneylenders for elections for the panchayat and so on2.
loans which pushed them further into the The microfinance sector has grown
vicious cycle of indebtedness. The reason exponentially over the past few years and
behind this was access or the lack of it and the World Bank estimates that there are
not interest rate. now over 7000 Microfinance Institutions
Microfinance has come to be recognised (MFIs), serving some 16 million poor
as the most viable, efficient and result- people in developing countries. The
oriented mode of financially empowering total cash turnover of MFIs worldwide
the poor. For Robinson “Microfinance is estimated at US$2.5 billion and the
refers to small scale financial services potential for new growth is outstanding.
for both credits and deposits – that are It is estimated that worldwide, there are
provided to people who farm or fish or 13 million microcredit borrowers, with
herd; operate small or microenterprises USD 7 billion in outstanding loans, and
where goods are produced, recycled, generating repayment rates of 97 percent.
repaired, or traded; provide services; work It has been growing at a rate of 30 percent
for wages or commissions; gain income annual growth3.
from renting out small amounts of lands; However, several issues and impediments
vehicles, draft animals, or machinery and to the success of microfinance as an
tools; and to other individuals and local industry have cropped up, the primary of
groups in developing countries, in both them being: scalability and sustainiblity
rural and urban areas”.1 Microfinance of MFIs, and outreach and impact of the
also entails the condition of sustainably microfinance initiatives. Thousands of
Sabyasachi Kashyap
delivering the services and is not merely MFIs around the globe are realising that the
sabyasachi@telecentremagazine.net confined to credit (microcredit) but solution for the scaling up, and ensuring
encompasses in its range savings, insurance, maximum outreach and sustainability of
i4d | June 2009
6

palmtop computers is typically uploaded to the MIS at the end
of the day, either directly in the branch office or via a remote
communications link. Furthermore, the roll-out of wireless
broadband infrastructure will enable these systems to be always
online resulting in true real-time data collection and monitoring
of the loan portfolio at branch and institutional levels.
Correspondent banking
One of the key challenges for MFIs is providing financial
services to clients in remote areas including rural areas where the
population density is low, the market is smaller and providing
service entails high costs. Correspondent Banking – whereby a
bank links itself with third party merchants located in remote
areas – has emerged as a solution for this problem of outreach.
Correspondents manage transactions on behalf of the partner
Photo Credit: CARE India institution and are remunerated on a fee-for-service basis. Bank
Correspondents are expected to be having long-term businesses,
MFIs lies in leveraging the benefits of technology, more specifically and should be respected and trusted in their communities. The
information and communication technologies (ICTs). ICTs have Bank Correspondents should also be ‘ICT-enabled’; generally
opened new window of opportunities for the MFIs to reach out to equipped with equipments such as an Electronic Funds Transfer at
more people, controlling the risks making the business sustainable, Point of Sale (EFTPOS) device, barcode readers and/or keypads, a
and bringing down the costs of operation. With new softwares personal computer, etc. They are linked to the partner institution’s
specially designed to cater to the needs of the MFIs, mobile servers using a telephone line, cable or satellite link. Post offices,
phones, efficient Management Information Systems, among supermarkets, general stores, grocery stores, telecentres, etc, are
others, technology can and will in the near future bring about a good examples of Banking Correspondents. In India, commercial
paradigm shift in the domain of microfinance. banking entities like State Bank of India, HDFC, have tied up
with the respective Service Centre Agencies(SCAs) in the states
ICT usage for MFIs under the framework of National eGovernance Plan (NeGP) to
The current discourse on and practice of microfinance has provide Banking Correspondent status to the Common Service
inevitably redirected itself through the ICT route for maximising Centres (CSCs) equipped with ICT infrastructure and provide
outreach and ensuring sustainability. Adoption of ICTs also brings microfinance services through them.
about business processes re-engineering because they povice
efficient, transparent and cost-effective mechanisms to run the Credit cards, and ATMs
business of MFIs. MFIs have readily adopted ICTs for they have In today’s world of banking, consumer credit cards are an
been looking for a change agent that will harness the benefits of indispensable part of the bouquet of services offered by a financial
ICT tools for best possible management and reduce costs, time institution. Some of the advantages of consumer credit cards
and efforts. are reduced costs associated with small transaction lending,
unsecured credit, small transactions, and pre-defined credit
Management Information Systems (MIS) limits. Other salient features of credit cards include on-demand
To monitor the quality, sustainability, and efficiency of the loan borrowing, re-draw facility, and repayment flexibility within
portfolio, to measure its development impact, and properly pre-defined guidelines. Since these services address the needs of
manage the administration tasks of an MFI, computerised small borrowers also due to their potential to relieve them from
Management Information Systems comes in very handy. MIS are their dependency on moneylenders for the same set of services
the most fundamental aspect of an MFI’s hi-tech infrastructure that are not provided by MFIs. Due to this utility of credit
and it is difficult for an MFI to upscale significantly and maintain cards the concept of Microcredit Cards have emerged and with
the accuracy and transparency of its loan portfolio without an more opportunities. A credit card enabled MFI can implement
MIS that can grow with the institution. There is no denying the microfinance tuned credit-scoring alogrithm which ensures
fact that an appropriate backoffice MIS is the backbone of ICT that clients who have proved their credit worthiness over time
innovation for the delivery of microfinance services. through successful business transactions with MFIs can have their
However, for MIS to really contribute to the efficiency of the credit limit increased and be given access to additional sources
MFI, it has to be accurate, and up to date. MFIs find it difficult of credit. Smart cards have an embedded computer chip that can
to maintain updated records as they have their offices in remote store client and transaction data, as well as process information.
locations which rely on manual data-entry and paper based Smart cards function as electronic passbooks, thereby reducing
transaction records. ICT innovations like mobile computing reliance on printed receipts. However, the introduction of card
applications and palmtops at the hands of the loan officers who based services would demand setting up of EFTPOS functionality
can directly record the transaction into the MIS can make this and/or Automatic Teller Machines (ATMs). Because all relevant
system more efficient and up to date. The data entered into the client data is stored on the card,
June 2009 | www.i4donline.net
7

the options because of the ubiquity of its use and popularity even
among the poorer section of the society. It is estimated there
will be three billion mobile subscribers in the world by 2010.
World GSM Association, further adds that mobile phone is the
first and only communication technology to have more users
in developing countries than in developed countries. Mobile
phones have become mobile wallets by facilitating electronic
payments in exchange for goods and services. m-Commerce has
assumed tremendous significance under the circumstances and
this development in m-commerce has positively affected the
microfinance industry also with usages like facilitating savings
deposits, loan repayments and other funds transfers. For the cost
of sending an SMS message, the phone user/microfinance client
uses an application stored on his mobile phone to initiate a transfer
from his mobile phone account to his bank account.
Microfinance softwares
In tune with the emergence of service delivery technologies, various
softwares have also been developed by technology innovators
helping the microfinance industry to tackle challenges associated
with efficiency, transparency, outreach and sustainability. The
softwares and tools like, FINO (Financial Information Network
and Operations), SafalFin, etc., vary in their nature and function.
However, their utility to the smooth functioning of the operations
are subject to speculation as some of the softwares come with high
investments which a startup MFI may not be in a position to
afford. However, low cost solutions like Computer Munshi System
developed by an Indian NGO named Pradaan has promised to
address this issue of affordability for MFIs. Built at low cost, this
MFIs can utilise EFTPOS systems and ATMs that do not software aims to improve book keeping of the Self Help Groups
need to be always online. This is a significant advantage in areas (SHGs) as also to improve transparency, equity and longevity of
where telecommunication services are unreliable and/or expensive. its groups. The model basically aims to improve the accounting
One more value addition to the services of MFIs are the use of and book keeping of the SHGs.4
biometric technology (such as fingerprint scanners) which ensure
client identification as well as privacy and data security. Conclusion
In a nutshell, various experiments for integrating microfinance
Internet banking and ICT have been undertaken and even more numbers are
Internet Banking, in many ways, has revolutionised the banking going to come in the future. The issue however, is to enable
scenario as it provides clients with real-time information about the MFIs to meet their goals by helping them have maximum
their accounts, and the ability to transfer funds between their outreach, be sustainable and be transparent in their business
accounts. It has become an integral part of the banking operations and processes. ICT can only be an enabler, and not the driver,
and by giving clients the liberty of using their own convenient and the real success of MFIs has to be measured vis-a-vis their
time to bank, and that too without having to visit the bank, it has social performance and not by their ICT/technology readiness
become an empowering tool. MFIs, however, face the challenge and preparedness.
of limited or more often than not no access to Internet services
of their clients. The rural telecentre network, being rolled out References:
across the developing world, could come in handy here too, by 1. Robinson, Marguerite S, ‘Microfinance: the Paradigm Shift from Credit Delivery
providing access to the clients. to Sustainable Financial Intermediation’, in Mwangi S Kimenyi, Robert C
Wieland and J D Von Pischke (eds), 1998, Strategic Issues in Microfinance,
Mobile banking Ashgate Publishing: Aldershot
Cellular phones, especially with GSM backbone, due to its 2. Microfinance: An Introduction by R Srinivaan and M S Sriram in Round Table,
accessibility and affordability are becoming an indispensable IIMB Management Review, June 2003, (Pg-52-53)
communication tool for the poor in the developing countries. 3. Hari Srinivas, The Global Development Research Centre (GDRC),http://www.
As per the World GSM Association report, during the year gdrc.org/icm/data/d-snapshot.html accessed on 29-05-2009
2003-2006, more than 800 million mobile phones were sold in 4. Report of the Steering Committee on Microfinance and Poverty Alleviation, The
developing countries. Mobile phones in today’s scenario have Eleventh Five Year Plan, (2007-08 - 2011-12), Development Policy Division,
become the only option for communication from being one of Planning Commission, New Delhi, May - 2007, Pg-28
i4d | June 2009
8

te r Security
Disas ent HIV/AIDS s
gem and tool
Mana ICTs Environmental 2.0 unity
Web omm
Cybercrim
e
using Concerns:
C ent
eWaste for owerm
p
Em
ICTs for
So ICT and
Net cial MSMEs
wor peace
ks
in Initiatives
Inte
rnet
c
Civi
nal/ CTs
sitio I
The Fuel Crisis ppo ics and
O it s tin
g
Giving Voices
Community and Pol ICT udge ing
and Assertive R
ights: Climate Change er B eam
Sexual and Radio end instr
Reproductive R in Gd Ma
ights an
Safe
Learning Drinking Water
for and
The O Grassroots Sanitation
Move pen ICT
ICTs and
ment Statistics Innovations
Food Security
Ne w g
nin
Lear ys Internet
Wa
Governance
Another year of i4d is here.
A host of issues are to be talked about.
Do you work on any of these areas ?
Do you have a project that should be covered ?
Are you an expert on any of the themes ?
Are you interested to collaborate ?
Write to us at: subir@csdms.in

INTERVIEW: RITA SONI, SENIOR VICE PRESIDENT AND COUNTRY HEAD - RESPONSIBLE BANKING, YES BANK,
Inclusion through
innovation www.yesbank.in
In an interview with
Sabyasachi Kashyap
from CSDMS, Rita Soni
talks about YES BANK’s
foray into financial
inclusion by banking and
microfinancing through the
Internet, ATMs, debit cards
and mobile channels.
Rita Soni
Senior Vice President and Country
Head-Responsible Banking, YES BANK
As per the latest census, almost one fourth of the population in products and services to un-banked/under-banked, low-income
India lives Below Poverty Line. What role do you see banking communities across urban and rural India.
institutions like YES BANK playing here? As of March 2009, Wholesale Lending stood at USD 60
At YES BANK, we are working towards sustainable solutions to million with 16 MFIs, covering an estimated 500,000 clients in
poverty through financial interventions by mainstream banking over 1000+ villages. YES BANK offers a comprehensive package
activities. Utilising sustainable and mainstream approaches allows of banking and advisory services, dovetailed with the expertise of
us to reach the scale which is necessary to reach the 800 million relevant business units within the Bank to use structured capital
Indians living on less than US$2 per day. In our young bank, market products to help MFIs leverage access to cost-effective
we have chosen to focus on ‘Responsible Banking’, promoting funds from a broader pool of sophisticated investors. The Bank
financial inclusion and business solutions to social issues. works as a holistic financial solutions provider working with
Where does financial inclusion fit into YES BANK’s scheme different stakeholders, i.e., mainstream investors, rating agencies,
of “Responsible Banking”? policymakers and technology vendors resulting in an aggregation
YES BANK is committed to creating equal financial opportunities of services, cutting-edge innovation and thought leadership
and enabling financial inclusion, but it is our emphasis on required to create a conducive environment for growth of the
innovation which is making the real impact. For instance, in industry.
microfinance the vision is to go beyond offering plain vanilla YES BANK also stands out for its focus on urban poverty
banking to providing the industry access to the mainstream capital using individual lending methodology in a market that has largely
markets. This approach helps MFIs achieve scale at a lower cost executed group lending to rural women. One of the ground
of funds, thereby resulting in affordable financial products for breaking features of our model is the fact that in setting up the
the Base of the Pyramid (BOP). YES BANK has a two-pronged first institutionally sponsored direct intervention model for
microfinance strategy to provide easy access to suitable financial microfinance, the Bank has created a benchmark institution that
i4d | June 2009
10

becomes the reference point for what our wholesale practice strives a vision to address issues of rural India through the previously
for in terms of helping transform partner MFIs into commercially mentioned innovative financial interventions, complemented with
viable financial services providers for the BOP. Direct Lending is expert advisory services and thought leadership. These practices in
accomplished through YES SAMPANN (Hindi for fulfillment), microfinance, ARSB, advisory and thought leadership go beyond
currently in its pilot phase with a portfolio of 2000+ micro- the banking sector regulator, Reserve Bank of India’s (RBI) directed
entrepreneurs. The business is projected to reach a client base of credit policy mandated through its Priority Sector Lending (PSL)
a 1,000,000 with a portfolio size in excess of USD 100 million in requirement, and adopts the spirit of addressing poverty to the
5 years offering products such as micro loans for working capital, core. Below are specific examples where this combination approach
insurance and savings schemes. has yielded results:
In 2008, YES BANK worked with Jain Irrigation Systems Ltd.
Across the world, there is widespread recognition that (JISL) to reach nearly 50,000 small and marginal farmers across
information and communication technologies (ICTs) have India. As a testament to this ‘business solution to social issue’,
tremendous potential in facilitating the inclusion of the the BANK conducted a comprehensive sustainability report for
underserved/un-banked population into the banking network. JISL, outlining both the manner in which they operate as well as
Can you share your views about this? specific social and environmental initiatives.
Bridging the technology gap between the urban and rural Another important rural client is Buldana Urban Credit
population through ICT is undeniably a step in the right direction, Cooperative Society. The financing from YES BANK reaches
however YES BANK feels that unless discrepancies in the content, approximately 8,000 rural households across western Maharashtra.
standards and delivery of basic, primary/secondary education and The Cooperative has a unique approach of ‘social banking’ which
vocational training programmes are proactively addressed, the has built the institution and met the needs of its members. In
effectiveness of ICT led initiatives will be greatly hindered. This addition to these financial services, the Bank conducted a detailed
opinion and mode of thinking has spurred YES BANK to begin study of the approach, uncovering a gamut of best practices that
forging working relationships with NGOs and social businesses can be applied by urban and rural banks.
currently working in the education and ICT space to develop The Bank also plays the role of thought leader in several areas
effective educational content, especially in the realms of financial including poverty issues. As an example, YES BANK and the
literacy, in order to enhance the national curriculum and skills American India Foundation jointly wrote a report highlighting the
development programmes in rural and urban India. social and economic issues surrounding rural to urban migration
in the country. A key feature of the report ‘Managing the Exodus’
What are YES BANK’s initiatives in providing banking is ways to provide rural populations employment opportunities
facilities to the underserved population in the rural areas? and social services through the public private partnership model
In addition to the microfinance initiatives already mentioned, in a bid to mitigate their migration to urban areas.
YES BANK also has a dedicated focus in the area of ‘Farmer In addition to financing Shriram Transport Finance Company
Financing’. The Agri-Business, Rural and Social Banking (ARSB) Ltd. (STFCL), YES BANK facilitated an HIV/AIDS awareness
team develops innovative financial models, which leverage the programme for their trucker clients. This programme brought the
outreach of various stakeholders in the Agri Value Chain to Bank forward to form knowledge partnerships and synergies with
address ‘last mile’ issues. In the last year, the Bank has disbursed the Clinton HIV/AIDS Initiative (CHAI) and the Red Cross.
approximately INR 700 crores in direct farmer financing, The programme has reached out to 14 locations, 10 states and
impacting approximately 140,000 farmers. ARSB works closely over 10,000 truckers who have been sensitized since this project
with Swiss Re and Agriculture Insurance Company of India (AIC) began in October 2007.
to facilitate the development and distribution of need-based
insurance products for the agriculture sector, such as weather Are the branches operating in the rural areas providing
insurance for grapes in the Nashik region. ‘anytime anywhere banking’ facilities? If yes, could you share
As an example, YES BANK recently announced its partnership your experiences with this?
with Zameen Organic, a farmer-owned producer company aimed A standard feature in all our branches, urban and rural, we offer
at closer collaboration between farmers and companies to fortify ‘Anytime Anywhere Banking’ through the Internet, ATM, Debit
inclusive and sustainable growth while building a transparent Card and Mobile Channels. Customers can also transfer funds
supply chain. This alliance intends to create equal opportunities for at their convenience, from home or office, to over 53,000 bank
producers and workers who have been economically marginalised branches across the country using the NEFT and RTGS facility.
because of the conventional trading system. The business model They are also given complimentary multi-city payable at par
empowers 6500 farmers to have effective and end-to-end control cheque books for ease of payments. Under the aegis of the ‘One
on the ‘Fair Trade Organic Cotton’ supply chain which has resulted Branch’ model, customers can access their account from any of
in improved economic condition of farmers from the Adilabad the 117 state-of-the-art YES BANK branches, at no extra charge.
(Andhra Pradesh) and Vidharbha (Maharashtra) region. We were also one of the first few banks to offer complimentary
access to over 32,000 ATMs in the country. Our technology edge
Could you elaborate a bit more about your experiences in imparts ‘reach and easy’ access to our rural branches and our
the rural areas? ‘anytime anywhere’ facilities have received encouraging response
Within the Responsible Banking framework, YES BANK has in rural areas.
June 2009 | www.i4donline.net
11

BANKING THE UNBANKED GLOBALLY
One billion
opportunities
Introduction what banks can do to capitalise on this • Simplicity and speed in processing
Look and you’ll see an exciting landscape opportunity. • Small product sizes when it comes
emerging in the banking arena. One where to loans and low-balance savings
there is a billion-strong market actively How to bank the unbanked accounts
seeking financial services but remains In China and India only about a third of • Proximity and ease of access
largely unattended to. These globally the population participates in the formal • Ba s i c f i n a n c i a l e d u c a t i o n o r
distributed prospective customers represent banking sector. In Africa the number is just information since the unbanked
enormous earning potential for banks, but 25 percent. India has the second-highest may not understand even elementary
constitute the unbanked. number of financially excluded households concepts of banking
The unbanked are those who do not in the world – 135 million – after China’s Most banks find it difficult to meet
utilise banking services and have limited 263 million. Africa as a whole has 230 these needs because of the high economic
banking needs. The unbanked are not million unbanked households, and Central cost of servicing these demands. However,
the poorest of the poor. However, they and Eastern Europe and Latin America have a little out-of-the box thinking in devising
certainly include those whom banks need 19 million and 42 million, respectively. products that are simple and accessible can
to serve but cannot do so profitably in the But irrespective of where in the help ensure inclusive growth.
existing banking environment. Though world they might be, this unbanked Some of these measures could include
these consumers need access to banking section of society has similar needs for tying up with an NGO or with a retailer and
for savings, loans and microfinance, they financial services. Apart from the obvious using village residents and empowerment
do not have bank accounts. The reasons requirements of savings, loans, transactions, groups as representatives. These can
for this are compelling. and investments, the unbanked have lower customer acquisition costs and
• Lack of steady and substantial income certain special needs, which are: increase customer base, thus helping
leading to a fear of insufficient funds • Flexibility in savings and repayment banks overcome the high cost challenge.
for an account schedules owing to a lack of steady Such groups also help banks mitigate risks
• Limited access to banks, especially in income associated with dealing with the unbanked.
remote areas An estimated 2.6 million self-help groups
• Lack of formal employment that in India are linked to banks, giving
precludes a financial history financial institutions access to 40 million
• Poor financial literacy
• Psychological factors such as mistrust
This paper aims to households.
It is important that the products are
of financial institutions educate the banking downsized without being downgraded to
This unbanked billion is not outside the match the unbanked population’s smaller
banking sector by choice. An important sector to reach out to requirements by offering low installments
reason for their predicament is that banks and flexible repayment options. Banks
do not offer them suitable products the unbanked masses also require performance metrics and
tailored to their needs. In effect, they have regulatory conditions that are more suited
been excluded by the banks’ inability to around the world to including the unbanked in the financial
understand their requirements and the mainstream.
unwillingness to adopt innovative models
by giving examples Some banks are using inter-industry
to serve them.
However, this billion also constitutes
from across the globe partnerships to increase financial inclusion.
For example, banks in Brazil have added
an enormous opportunity – if banks about initiatives of 100,000 point-of-sale locations to distribute
are willing to accept the challenge of products by tying up with retailers.
including them with an eye on the bigger some enterprising Not only are these channels cheaper for
picture. This paper provides a regional banks but they are also more convenient
perspective to this issue and examines banking entities for consumers.
i4d | June 2009
12

Banks must realise – and they are seeing the light – that since Mobile banking is another way of reaching out to such customers
the unbanked have remained unaddressed by traditional financial and is also a huge opportunity for banks in India. According to
institutions, they will not hesitate to choose newer players for a TRAI report, the total number of mobile subscribers by March
basic banking services such as payment and deposit transactions. 31, 2008 was 261.08 million as against last year’s 165.09 million
Collaborating with telecom players, adding a mobile channel, and (an increase of 58.14 percent). This figure shows that in just
utilising cross-selling opportunities will go a long way in meeting three years, the number of mobile subscribers has grown over 4.5
the needs of the unbanked. times. India is adding more subscribers per month than any other
In many emerging economies, mobile consumers are growing at country. According to the GSM Association (Global Association
a much faster rate than bank customers. Mobile banking is taking for GSM Providers), the next billion subscribers will come from
off because it is convenient, fast, simple, and secure. Moreover, the BOP (Bottom of the Pyramid) market, of which India will
it is a cost-effective option for banks. Gartner has estimated that have the largest share. The growth of mobile phone subscribers
there will be 33 million mobile payment users worldwide in 2008, is outpacing the growth of banking customers as also PC and
with the Asia Pacific taking the lead. Gartner expects this number Internet users in India.
to triple to 103.9 million users in 2011. In 2006, banks were allowed to take the help of NGOs
Other forms of branchless banking and e-payment gateways and microfinance institutions as intermediaries in offering
such as payment cards and the Internet can also help banks increase banking services through the use of correspondents. This was
their outreach. Banks need to experiment and include the next perhaps a factor for many banks that opened six million no frills
billion consumers not merely for the socio-economic assistance accounts with low or zero minimum balances between March
they will gain. The step will also have a strong business imperative 2006 and 2007.
for banks. Not only will a bank increase its customer base, but ICICI Bank, HDFC Bank and Citibank have launched their
it will also ensure increasing numbers of future customers as own microfinance programmes. HDFC Bank thus has tied
incomes increase. up with NGOs in Andhra Pradesh and Tamil Nadu to make
Let us examine how banks are reaching the unbanked in various financial services accessible to the rural poor. Citibank has linked
parts of the world, namely, India, China, Eastern Europe, parts up with NGOs. Standard Chartered plans to lend $100 million
of Africa, and Latin America. for micro-financing by 2008, up from current commitments of
$40 million.
India Banks are looking at technology to provide banking services at
The Indian banking market is zooming, with assets expected to low cost – and this includes rural banking too. Citi has set up a
reach $1 trillion by 2010. An expanding economy, a growing bio-metric ATM as a part of its ‘no frills’ Pragati account for the
middle class, and technological innovations are contributory under-banked. The ATM recognises the customer through their
factors, according to a Celent report, ‘Overview of Indian thumb impression and can interact in regional languages.
Banking Market’.
The industry is focusing on the retail side of the market, with China
a Compound Annual Growth Rate (CAGR) of 23 percent in Estimates about the numbers of unbanked Chinese vary. The
the past five years. However, despite this thrust on retail banking, People’s Bank of China (PBC) estimates that only 36 percent
banks will have to come up with creative and simple solutions to of Chinese rural households have access to financial services. As
make money in India. This is because India has a huge unbanked one indicator of demand, the informal finance market has been
population and unless this is included, neither will banks prosper, estimated at anywhere between CNY 1 trillion ($132 billion) to
nor the country. CNY 2 or 3 trillion.
Banks have also realised the potential of this market and But the bigger Chinese banks have for many years now
have come up with innovative means of reaching it. They are been moving out of rural areas, goaded by commercialisation
going back to rural pockets for financial inclusion. State Bank and competitive pressures. According to the State Council
of India is drawing up plans to reach out to 100,000 villages. In Development Research Centre (DRC), the four big state banks
September 2007, ABN Amro Bank announced its microfinance have reduced their presence in rural areas by over 43 percent in
division had provided basic financial support to some 500,000 ten years, closing 30,000 branches in the last five years alone.
underprivileged households.
Building more branches in the countryside may not always The Chinese government has launched several initiatives
be cost-effective. So banks need to explore other options by to test out new forms of rural financial service providers.
developing a better understanding of what rural households need Among them:
and offer new products and distribution networks to suit them. • The People’s Bank of China in December 2005 launched
Providing banking services through ‘Banking Correspondents’ a pilot initiative to establish Microcredit Companies using
represented by self-help groups, NGOs and other approved commercial licensing
organisations is one branchless banking mechanism. Touch-points • The China Banking Regulatory Commission in December
may be set up by such organisations at places commonly visited by 2006 introduced their own pilot, creating new types of
the unbanked, such as the village markets or schools. This may be licenses for rural financial institutions
supplemented by outreach teams equipped with hand-held devices McKinsey believes that given the reliance on cash in rural
on which simple banking transactions can be performed. China and that additional ATMs do not appear to be the answer,
June 2009 | www.i4donline.net
13

the existing mobile Short Message Service network could quickly banking options. This also offers banks a channel for growth.
and cheaply provide an SMS-based payment system in rural Similarly, post offices, which constitute more than 50
areas. Since the most expensive parts of the infrastructure — the percent of the physical infrastructure for access to the financial
network and phones — are in place, this solution would be sector, could provide an innovative POS alternative to reach out
relatively low in cost, between $40 million and $60 million. By to the unbanked.
forming a partnership, banks, network operators and merchants According to the August 2003 Datamonitor report, banks in
could unlock spending. the region are looking to move beyond branch-centric distribution.
The Chinese largely rely on cash payments, thus increasing the This includes extending ATM networks and looking at online and
importance of the cash-based e-payment channel. Some leading phone banking. The highest growth in IT spending was expected
third-party payment providers are adding cash-based and non- to come from Romania and Bulgaria.
bank based payment options to their offerings. These include:
1. Cash remittance: Alipay is a third-party payment provider, Africa
allowing users to top up accounts with cash through China’s According to the IMF, African countries are enjoying their
postal service. This service was launched in March 2007 in best period of sustained economic expansion since attaining
selected China Post branches throughout China. independence. Real GDP growth is expected to rise from 5.7
2. Mobile toll stations: Smartpay, China’s leading mobile top- percent in 2006 to 6.8 percent in 2008. Still, only 20 percent of
up company, has formed a network of approximately 30,000 families in Africa have bank accounts.
dealers. Smartpay dealers allow users with bank accounts to
easily use Smartpay’s services, which in turn gives Smartpay
access to a much wider range of potential users.
3. Targeting the unbanked with pre-paid cards: e-payment
player IPS uses mobile and telephone prepaid cards in order
to reach unbanked users. This service takes advantage of the
popularity of prepaid top-up cards used for phone bills, online
games, and virtual currencies in China. The cards are usually
purchased with cash at newspaper kiosks, small shops, and
internet cafes. IPS operates a service called Ipay.
Eastern Europe
In Poland, only 50 percent of the country’s population has a bank
account, according to ING Group. Banking penetration was 69
percent in Hungary at the end of 2003.
Many East European (EE) residents avoid setting up bank Katimba market, Central Kampala, Uganda. Credit sln.org.uk
accounts because they lack confidence in the banking system.
This mindset is gradually changing as governments encourage Ethopia has less than one bank branch per 100,000 people – a
salary payments directly into bank accounts. developed nation like Spain has an average of 96 branches. Even
Austria’s Erste Bank has the largest network in the region and in South Africa, where the sector is more sophisticated, only 40
intends to target the unbanked in Hungary, the Czech Republic, percent of adults have bank accounts. But there is a huge demand
Croatia, Serbia and Romania. Western banks in EE are focusing for bank services. Finding this demand unfulfilled, millions of
on meeting the needs of the younger population. In Poland, only Africans turn to informal services or invest in cattle.
49 percent of people over the age of 15 have a bank account, But banks are increasingly adopting innovative methods. South
according to Polish research company Pentor. Africa has physically taken branches to the unbanked, either as
Almost 40 percent of Poles who participated in a recent banking prefabricated units, or in vans that make visits to under-served
survey attributed the low level of banking penetration to their lack areas. In remote areas, machines have been installed in shops where
of savings. Only 5 percent of Polish people use Internet banking, customers print out a slip and present it to the shopkeeper, who
against an average of 24 percent in Europe as a whole; 4 percent provides the cash. Some rural branches and ATMs rely on solar
of Poles use telephone banking services compared with 7 percent energy and satellite phone.
in Europe, according to Forrester Research. The ‘Big Four’ banks of South Africa (ABSA, First National
To make it easier for Poles to access banking products, ING Bank, Nedbank Group and Standard Bank) and the government
Bank Slaski, the Polish operation of ING Group, has simplified developed the innovative Mzansi account in 2003 which is a
some products. The new offerings include a savings account which low-cost transaction account. It enables banks to cover at least
offers one flat interest rate and a low-interest credit card. 70 percent of the unbanked market in a relatively short time.
Plastic card technology is expected to present the banking The government provided a small subsidy to cover the cost. It is
industry with an important means of tapping the unbanked targeted at people who earn less than R2,000 (US$264) a month.
market. Moreover, according to Global Insight, electronic It now has more than 4 million subscribers.
payments are expected to grow from $3.8 billion in 1999 to $25.8 Studies conducted by Genesis Analytics for the Finmark Trust
billion in 2009, thus indicating greater use of non-traditional in 2004 have suggested that point-of-sale (POS) facilities can play
i4d | June 2009
14

an increasingly important role in providing the unbanked access
to basic financial services in South Africa.
West African financial services biggies Zenith Bank and
Ecobank and multinationals Citibank and the International
Finance Corporation have set up the Acción Microfinance Bank in
Nigeria. It aims to provide low income earners and entrepreneurs
with credit facilities and finance.
Mobile banking seems to be the most promising option in
Africa. Few Africans may have bank accounts, but many have
mobile phones. Wizzit (a financial services provider), First
National Bank (FNB) and MTN Banking (a joint venture between
Standard Bank and a mobile-phone network), are targeting the
14 million unbanked South Africans.
In Kenya and Botswana, 17 percent of the unbanked own El Alto Market. Credit fellowsblog.kiva.org
a mobile phone, according to the FinMark Trust. In Kenya,
Vodafone and Safaricom, Kenya’s leading mobile operator, about 5.1 million customers and 1800 branches. It has grown
launched an m-commerce payment service, M-PESA, aimed at the steadily in recent years by concentrating on personal lending,
unbanked in March 2006. Within three months, it had 150,000 car financing, insurance, and investment funds. It helps that
customers, with 2,500 new users signing up each day. local interest rates are dropping and that Brazil’s government
First Bank linked-up with Nigeria’s second biggest mobile has introduced incentives to increase credit. For example,
operator, Globacom. The partners introduced the GloFirst card payroll loans, whereby installments are debited from paychecks
in conjunction with the switching company Interswitch. GloFirst are now permitted.
can be used to withdraw money, check card balance, print mini In Brazil, banks are using nonbanking outlets, such as kiosks
statements, change the Personal Identification Number (PIN) and and even supermarkets, to reach customers. However, the central
transfer money to another cash card or bank account. bank’s efforts in the way of promoting community representatives
or agents and microfinance efforts are slowly bringing more of the
Latin America unbanked into the mainstream.
Chile reports the highest penetration and the lowest percentage However, obstacles remain: agent-handled accounts are subject
of its population living below the poverty level. It is followed by to transaction limitations, interest rate caps render microcredit
Brazil, where the majority of households have checking accounts unprofitable and credit information is scanty.
because most payrolls in the formal economy are disbursed Electronic payments in Latin America are slowly taking off, but
electronically. Until recently, 40 million Brazilians had no access are hampered by factors such as low income and lack of banking
to banking services. Nonetheless, access to consumer credit in penetration. Banks are trying to keep the reform momentum
Brazil is mostly limited to the middle and upper class, and even going. For example, Mexico has launched a three-year public-
foreign banks target primarily customers with an annual income private initiative to expand the number of chip-enabled point of
of at least $20,000. sale terminals. The goal is to divert the use of cash taken from
In Mexico, the formal banking sector has targeted only the ATMs to POS debit-card transactions in its continuing battle to
top 15 percent of the population, while the other 85 percent is suppress the informal economy.
considered too risky and unprofitable. Now, however, more foreign
banks in the sector have begun to pay closer attention to the retail Conclusion
credit card business and other remittance-linked products. In The numbers involved in meeting the needs of the unbanked
Colombia, where 55 percent of the population lives under poverty may seem daunting, but in reality they represent a billion-strong
level, access to bank credit is low at 23 percent. opportunity for banks. By paying greater attention to their wants
Therefore, Latin America’s huge unbanked population offers an and developing sensitivity to their needs, banks will be able to
enormous opportunity for banks recognising their potential. To develop customised products and include the unbanked in their
serve the banking needs of a relatively low-income economy with scheme of things.
low penetration requires innovative and imaginative non-branch Banks may do well to remember that they have a business
solutions. Microfinance and IT are enabling banks to serve the imperative in converting the periphery into the mainstream.
excluded at relatively lower costs. Banks are also helping create Gautam Bandyopadhyay
financial literacy with the help of community leaders. Principal Consultant at Infosys Technologies
Bancomer, one of Mexico’s nationalised banks, is reaching out
to the lower-income segment by offering simplified and more References:
accessible products, such as pre-paid credit cards or cards with fixed Research by Boston Consulting Group
monthly payments. To cultivate a culture of savings in Mexico, Research by Celent
McKinsey Quarterly
Bancomer has made available a savings account-debit card combo
The Economist
for a minimum deposit of about $70. The Financial Express
Santander Banespa, a Spanish-backed bank in Brazil, manages
June 2009 | www.i4donline.net
15

MICROFINANCE IN INDIA
Microfinance:
A bigger picture
The term, ‘Microfinance’ refers to the services. Some major initiatives include that the NFBC must have a minimum
provision of a broad range of financial the bank linkage programme under US$ 46,511.6 Net Owned Funds (NOF)
services to low-income households the guidance and supervision of the that will make it eligible to accept public
and their microenterprises. Financial National Bank for Agriculture and Rural deposits. RBI introduced a new regulatory
services generally include microsavings, Development (NABARD) in 1992, the framework for the NBFCs in 1998, focused
microcredit, money transfer vehicles setting of the Rashtriya Mahila Kosh to on NFBC accepting public deposits with
and microinsurance. Microfinance re-finance microfinance activities of NGOs a view to safeguarding the interests of the
services are generally provided by formal in 1993 and the establishment of Small depositors. RBI also established a Micro
institutions, such as rural banks and Industries Development Bank of India Credit Special Cell in 1999-2000 to
cooperatives, semiformal institutions (SIDBI) Foundation for Micro-Credit suggest measures for augmenting flow of
such as non-government organisations; (SFMC) as a financier of Microfinance microcredit. In the same year, NABARD
and informal sources like money lenders Institutions (MFIs). On the policy front, established the Task Force on Supportive
and shopkeepers. RBI has come out with directives on Policy and Regulatory Framework for Micro
various aspects of microfinance provision. Credit. Based on the recommendations of
Need of microfinance in India Releasing the fact that Self-Help Groups the Advisory Committee on Flow of Credit
Statistics from the World Bank estimates (SHGs) and NGOs are a priority sector, to Agriculture and Related Activities from
that more than 87 percent of India’s poor RBI engaged them in microfinance the Banking System, in its Annual Policy
can not access credit from formal sources business by registering them as Non- Statement for the year 2004-05, RBI
and therefore have to depend on money Banking Financial Companies (NBFCs). stated, in view of the need to protect the
lenders who charge them exorbitant As a result, commercial banks, regional interests of depositors, MFIs would not be
interest rates ranging from 48% to 120% rural banks (RRBs) and cooperative banks permitted to accept public deposits unless
per annum or even higher. This shows have also emerged as important channels they complied with the extant regulatory
that the potential market of small money of microfinance provision. framework of the Reserve Bank.
lenders, who can lend money according to Through the RBI (Amendment) Act, T h e Mi c ro Fi n a n c i a l Se c t o r
the demand for financial services for this 1997, RBI made it obligatory for NBFCs to (Development and Regulation) Bill,
section of the society. The provision of such apply to RBI for certificate of registration. 2007, was introduced in March 2007
services, if implemented correctly, could One of the conditions for application was which applies only to three categories of
have a significant impact
on the poor. Releasing this Table 1: Growth of linked SHG’s in the regions
fact, under the Reserve
Region Beneficiaries
Bank of India Act, 1934, % %
RBI undertook regulation March March March March increase between increase between Share of Share of BPL
and supervision of all the 2004 2005 2006 2007 2005-06 2006-07 population population
banks promoting and doing North 52,396 86018 133097 182018 6% 6% 13% 7%
microfinance. North 12278 34238 62517 91754 3% 3% 4% 3%
East
Regulatory East 158237 265628 18% 18%
394351 525881 22% 29%
framework of
microfinance in Central 127009 197365 267915 332729 12% 11% 25% 32%
India West 54815 96266 166254 270447 7% 9% 15% 14%
In early 1990s, there have
South 674356 939941 1214431 1522144 54% 52% 21% 15%
been many significant state
initiatives in the institutional All India 1079091 1618456 2238565 2924973 100% 100% 100% 100%
and policy spheres to enable
the poor access financial Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, March, 2007
i4d | June 2009
16

not-for-profit MFIs: societies, trusts and cooperatives. These Table 2: Region-wise growth in outreach in 2003-04 and 2004-05
are collectively referred to in the bill as Micro Finance MFIs by No. of Outreach - FY Annual Growth Annual Growth
Organisations (MFOs). regional MFIs 2005 (%) in outreach (%) in outreach
distribution FY 2005 FY 2004
Progress under the SHG Bank Linkage East 18 332476 61.12 32.68
Programme (SBLP)
West 2 6,738 31.4 42.15
India has seen an average annual growth rate of 82 percent in
providing microfinance services through SHGs in the period from North 3 91317 11.34 19.5
March 1993 to March 2006, in relation to a 110 percent growth South 45 1710323 67.5 51.73
rate in terms of credit amount. SHG Bank Linkage Programme
Total 68 2140854 62.86 45.94
has proved to be the major supplementary credit delivery system
with wide acceptance by banks, NGOs and various government Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi,
departments. During the financial year 2005-2006, around March, 2007
620,109 SHGs were linked under the SHG Bank Linkage Table 2 shows that growth is concentrated in two regions, the
Programme, it incorporates more than nine million households South and East, which already account for about 95 percent of
into the financial sector. membership. The 31 percent growth was recorded in the West,
According to the NABARD Annual Report 2007, the western on an extremely small base, while only 11 percent growth was
region of India has experienced 63 percent of growth in its entire registered in the North, among a larger base. With financial
region. Table 1 shows that the growth rate in eastern region was support from government for SHG programmes the establishment
33 percent and in central region, the growth rate was 24 percent. of a large number of MFIs following the SHG model has
The figures also show that the southern region is leading in been registered.
the programme. During the financial year 2005-2006, Andhra From the perspective of the legal framework (Fig 1), the
Pradesh had further consolidated its role as the leading state in the proposed new microfinance law does not cover nearly 80% of
size of SHG movement by holding 279 households participating in these clients since 73% are served by NBFCs or MFIs on the
SHGs for every 1,000 households. During this period, the number verge of transformation to NBFCs and another 6% by Section
of new loans in Andhra Pradesh, remained about the same but the 25 (not for profit) companies. Such institutions fall outside the
number of repeat loans increased by 31 percent/year. Himachal ambit of the proposed law.
Pradesh, Kerala, Assam, Rajasthan, West Bengal and Maharashtra
formed an intermediate group with 94, 85, 82, 65, 61 and 56
households participating in SHGs for every 1,000 households,
respectively. In Uttaranchal and Jharkhand there were less than
thirty-two households participating in SHGs for every 1,000. In
Jammu and Kashmir, Haryana, Punjab and Arunachal Pradesh
there were less than ten households participating in SHGs for
every 1,000 of the total households.
MFI performance: Efficiency with growth
The MFI model in India is characterised by a diversity of
institutional and legal forms. The first and most well known
MFI, SEWA, was incorporated as an urban cooperative bank in
1974 and demonstrated that poor people were bankable. In the
1980s, a number of registered societies and trusts commenced
group-based savings and credit activities on the basis of grant
funds from donors. MFIs of all legal forms have their own funds
or are built up mainly from; (i) donor grants in the case of societies Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi,
and trusts, (ii) equity investments and promoters’ capital in the March, 2007
case of companies, (iii) shareholdings in the case of cooperatives,
as well as (iv) retained earnings in the case of all three categories, Progress under social performance
the main source of funds is debt, borrowed from the banks and MFIs and those who work for MFIs like banks, investors, and
apex financial institutions. donors are social enterprise. For any MFI, financial sustainability
In the last decade, the MFI model has seen a series of critical is important. An MFI that can cover its costs - has good financial
developments in the Indian MFI sector. According to the estimates performance - can grow to serve more clients in more areas.
of 2006 Annual Report by Microfinance India, joint effort of Social performance in microfinance is defined as “the translation
Care, Ford Foundation and Swiss Agency for Development and of mission into practice in line with accepted social goals”: These
Cooperation (SDC), Large MFIs are more efficient in the disbursal social goals relate to:
of funds with 81 percent of total assets held as loans, as against • Reaching the poor or excluded clients
75 percent in the case of medium and small MFIs. • Improving the quality and appropriateness of financial
June 2009 | www.i4donline.net
17

Poverty Audit
The estimates from the 2006 Annual Report of NABARD,
Social Rating
show that commercial bank lending for the MFI sector has
South
doubled every year for the last three years. Most of the banks have
• Bullock-Cart Workers • ASA Model
dedicated microfinance units. Lending has been concentrated in
Development Association (BWDA) • SKS Microfinance
• ASP • Payakaraopeta Women’s the South but since the agrarian crisis in Andhra Pradesh most
• BASIX Mutually Aided banks are expediting their efforts to expand to other locations
• Acts Mahila Mutually Aided Coop Co-operative Thrift too. According to these estimates, about 60 percent of ICICI
Thrift Society (AMMACTS ) and Credit Society Bank’s microfinance lending consists of loans to MFIs under
• SWAWS Credit Corporation India (PWMACS)
the partnership MFI model. Under the partnership MFI model,
Ltd. (SWAWS)
major banks like ICICI Bank are leading the way by partnering
North
with SHARE and Basix that enabled MFIs to expand lending
• CASHPOR Financial and • Rashtriya Gramin Vikas the same amount. Banks like Axis, ABN AMRO, ING Vysya,
Technical Services (CFTS) Nidhi (RGVN) Standard Chartered and HSBC have supported 40, 19, 19, 12 and
• Bandhan Microfinance • Nav Bharat Jagriti 8 MFIs, respectively. Citibank is providing core funding for the
Kendra (NBJK) Indian School of Microfinance, which is part of the SEWA family
of institutions in Ahmedabad, and ICICI bank is supporting
services training and incubation initiatives by Basix, CASHE-CARE,
• Contributing to employment and enterprise growth and MicroSave.
• Improving the economic and social conditions of clients and
their households Conclusion
• Ensuring social responsibility to clients, to staff and to the Though the government proposed the Microfinance Bill in 2005
communities they operate in but there are two important areas of reform that would have a more
In 2006, M-CRIL (Micro-Credit Ratings International immediate impact on financial inclusion, at least with respect to
Limited) conducted social ratings among MFIs in India with credit services. MFIs most often are subject to misunderstanding
support from the Friends of Women’s World Banking (FWWB) by the public, suspicion by local politicians, and destructive
and the Ford Foundation. In its rating, twelve MFIs, eight from and ill-informed rumours from competing MFIs. It becomes
the south, four from the north, are providing microfinance services critical to understand the reputation of MFIs among various
as one aspect of their social performance. Out of these twelve, stakeholders, to what extent this reputation is negative, and why
five follow the Grameen model, three the SHG model, three are these reputations are formed. It is also critical that MFIs improve
Cooperatives (MACS) and one follows the individual model. transparency, streamline their operations and develop their
communications skills to develop a sound reputation and protect
Progress through commercial banking themselves against defamation and misinformation. As the sector
Most MFIs usually devote their energies in dealing with the grows and competition increases, over-indebtedness of clients
uncertainty of loans. The rapid expansion of the MFI model in the becomes a concern. There is a need to find out the extent and
last decade has been driven by private commercial banks. Initially patterns of competition, the extent of multiple borrowing,
the private banks were motivated by priority sector obligations and whether this is bad or not. There is also a need to think
since they did not have any rural branch networks. But after seeing of ways to manage competition so that competition affects
perfect repayment rates the banks have realised that investment clients positively.
in MFIs is a profitable activity. Ritu Srivastava
Gates Foundation gives $20 million to World Bank
The Bill and Melinda Gates It will make grants to banks and make IFC the largest investor in the
Foundation is giving $20 million to other institutions. The global economic microfinance industry.
the World Bank for a programme to crisis means access to financial The World Bank said its data shows
provide financial services in developing ser vices has become even more that 69 percent of small farmers in
countries. The World Bank will difficult for small farmers and rural India did not have credit with formal
use the Gates funding to establish entrepreneurs. financial institutions. In Honduras,
what it calls the Agriculture Finance In microfinance, the World Bank Nicaragua and Peru nearly 40 percent
Support Facility. Group’s biggest investor is the IFC, a of agricultural producers are “credit-
The programme’s mission is to profit-oriented financial institution. constrained,” and less than 1 percent
increase access to financial services, The IFC had a microfinance portfolio of farmers in Zambia and less than
such as savings, credit, payments and of $498 million in 2007 and planned 2 percent of the rural population in
insurance, in rural areas in developing to double its investment to $1.2 billion Nigeria have access to credit from
countries as profitable business lines. by fiscal year 2010, which would formal institutions.
i4d | June 2009
18

MICROFINANCE SECTOR IN GHANA
Microfinancing Ghana
The microfinance sector in Ghana is a from the general public.
fast growing industry. Financial Non Therefore, the inability
Governmental Organisations (FNGOs) t o r a i s e l ow i n t e r e s t
whose activities are mostly in rural liability through deposit
and urban centres directed their efforts mobilisation is a limiting
towards the productive poor. The mother factor in microfinance
organisation for FNGOs is the Association funding. The regulatory
for Financial Non-Governmental framework does not permit
Organisations (ASSFIN). Some Rural certain microfinance
Banks undertake microfinance projects. services such as insurance for
Rural Banks are licensed and regulated by clients by the microfinance
the Central Bank of Ghana through the institutions themselves.
ARB Apex Bank which is a mini Central Insurance, for instance,
Bank in Ghana for the Rural/Community have to be done through
Banks. The regulatory frameworks of registered Insurance
the Rural Banks limit their expansion Companies. The regulatory
into certain geographical areas outside restrictions are to forestall
their catchment’s boundaries. Financial instability in the money
Service Companies, Savings and Loans market and the economy
Companies, and some Commercial Banks of Ghana.
have made an entry into the microfinance The 2002 population
industry. Their microfinance operations census of Ghana indicated
are mostly confined within the urban 20 million people in Ghana.
centres for commercial reasons. Credit Apart from constituting a
unions also engage in microfinance. The higher proportion of the
apex body of all Credit Unions is Credit overall population (51%),
Union Association of Ghana (CUA women also dominate
Ghana). Credit Unions are owned by its agriculture, producing
members or clients. Traditional Susu (daily 70% of the national crop Sale of Mobile phone accessories has become a business in the villages
savings) Collectors under auspices of the output, as well as in trading
Susu Collectors Associations dominate where 24.7% of the 80.7%
the urban and rural areas. Despite tough employed are females, compared to As such, Ghana has seen a significant
regulation of this category of microfinance 7.4% of the 84% employed males. A increase in the number of MFIs attempting
service providers, operators often run away higher proportion of these women are to provide financial services to the
with the savings of their victims. The subsistence level farmers and traders. productive poor.
government of Ghana through the Central Given the background that women form
Bank is re-tightening the regulation of this a greater proportion of the population, The genesis of ASA Initiative
category of microfinance service providers. the potential microfinance market in After working for six years in the
Other informal sector initiatives are Ghana is dominated by women. The high microfinance sector at various positions
Self Help Groups and Associations who unemployment rate for the (15-24) age ranging from Manager, University of
undertake rotating savings and credit to group requires enterprise development and Cape Coast Credit Union to Director
their members on systematic basis. financing package to support individuals in (Microfinance), CRAN Microfinance,
The Government has been setting up the category, particularly the females who the author instituted ASA Initiative
microfinance projects in collaboration are more vulnerable. Microfinance Ghana. During her eventful
with development organisations for certain It is clear from the analysis above that a career, she has been succesful in the
sectors and/or deprived communities for significant proportion of the economically implementation of the microfinance
the past few years. active population is engaged in agriculture projects for the Government of Ghana
In Ghana, only Banks and Savings and and the informal sector. These enterprises under the Economic and Social Recovery
Loans Companies can accept deposits lack access to institutionalised credit. Programme (ESRP) of five districts in the
June 2009 | www.i4donline.net
19

western region of the country and Social investment Projects through microfinance with training to reduce women and
in the Abura Aseibu Amankessie district in central Ghana. She youth unemployment and underemployment in the rural and
was selected to join a team of five Practitioner Institutions for a urban centres.
study tour of the best five Microfinance institutions in Ethiopia
and Bangladesh. The purpose of the study tour was to enhance the ICTs for microfinance in Ghana
participating organisations’ potential for effective contribution to In Ghana, Rural Banks and other Microfinance Institutions
poverty reduction through microfinance in Ghana. As a result of are linked to the big commercial banks. Computerisation and
the lessons learnt from the study, she returned and started ASA competition has lead to the search for efficient ways of serving
Initiative after analysing the research done about the operations clients. Commercial banks have computerised their systems and
and strategies adopted by the other institutions and adapting them network with their branches. This has reduced the risks associated
to the Ghanaian milieu. with the transport of money over long distances. Microfinance
Over time she has been working with women groups, Institutions keep their reserve money accounts with commercial
youth and the productive poor, to enhance their capacity banks and rural banks in the villages. The use of Apex cheque by all
rural banks in the country and the fast clearing system facilitate the
institutions’ outreach to the microfinance clients nationwide.
Challenges Rural electrification project of the Ghana Government has
The microfinance activity began with a loan of US$ 1,000
facilitated the extension of Internet connectivity in the remotest
from her younger sister Vivian Tseyi (her lifetime susu
rural areas. Access to solar power in Ghana has complemented
savings) which Kitti lent to the first 10 women in 2006.
the efforts of electrifying remote places in Ghana for effective
In the same year the company was able to source a loan of
ICT usage. This has greatly facilitated the smooth functioning
US$100,000 from a local investment company to support
of offices and mobile micro financing in almost every part of
the microfinance business. Timely loan repayment led to
the country.
the approval of additional US$900,000 in 2007. However,
Mobile phone networks have been extended to almost all the
the high domestic interest rate of 31% which is currently
villages in the rural areas of Ghana. With the influx of foreign
at 39% has negatively impacted the reserves of the initiative
telecommunication companies, there is high competition among
and it’s capacity in making clients’ business successful. The
the players hence cordless home mobile phone sets, Kasapa Home
high domestic interest rate has, therefore, limited the ability
and Office Phones, were provided free to households as a strategy
of the initiative to expand its activities and reach the larger
of connecting all homes and offices with mobile phones. Because of
underserved population.
the free and low-cost handsets (ranging between US$4 - US$10),
Coupled with the high interest rate is the low capitalisation
the use of mobile phones has helped extension of microfinance
on lending to the microfinance clients. Lack of adequate
to rural communities in Ghana. Loan officers communicate
funding has become a limiting factor in reaching out to the
effectively with group members at anytime and anywhere, even
deprived communities who are still out of reach of these
in the farms. Head office and branch offices are in contact with
microfinancing institutions. To tackle this, ASA Initiative
officers on the field all the time through mobile phone network.
has started to look outside of the domestic funding market to
For instance, communication from Tigo (a popular cellular service
garner adequate funds. The organisation has been contacting
provider in Ghana) to Tigo network cost less than US$1 (US$
potential low interest fund providers/financers to help expand
0.7) from 6.00am to 6.00pm.
its funding capacity to reach out to many more rural and
The Internet can be accessed on mobile phones and in ASA
urban poor households through microfinance to improve
Initiative for example, all microfinance loans for approval are
their livelihood opportunities.
confined in one page credit memoir report and the soft copy
ICT for development and computerisation of the
is sent through email to all the members within the approval
operations for efficiency called for heavy initial investment.
committee who are based out of different offices and towns.
This was a big challenge and through careful planning Loan
Through Internet conferencing within a minimum of 5 to 30
Performer software was purchased in the year 2008 from
minutes loans approvals are given and feedback sent through email
Crystal Clear Software, Uganda to computerise operations.
for loan disbursement. This has reduced a lot of paper work, also
For full computerisation and branch networking to take
reduced the time taken for loan approval and made the entire
place, a bigger office building was needed where the head
system faster and flexible to reach out to many rural and urban
office would be set up. The initiative was able to acquire a
clients within the shortest possible time.
two storey building of which renovation would be completed
in the year 2010.
Another challenge was attracting quality human resource.
Using ICTs to reach the unreached
It is not always easy to connect all remote and rural areas. The
Initially as a young company, professionals were not attracted
advent of cost effective ICT solutions will enhance the coverage
because of fear of job and income security. However, as the
of microfinance to the underserved masses in Ghana, who
initiative began to offer remunerations slightly higher than
mostly reside in remote rural areas. A clear manifestation of this
that of the Commercial Banks, it has now attracted graduates
has been seen in the case of the economical and sometimes free
from the universities and polytechnics, some of whom were
availability of mobile communication systems and their impact
earlier working with the Commercial Banks.
on Ghanaian microfinance. ICT tools can be employed to collect
i4d | June 2009
20

loan repayments and savings on the field and all the related data potentials and opportunities within their settlements. The rural
entry work can be computerised to decrease the transaction entry clients would be assisted through ASA Initiative Cash Crop Project
time and costs. Even the above-mentioned change in transaction to acquire land of sizeable dimensions to cultivate cash crops for
initiation and completion can go a long way in reducing staff and long term sustainable income generation. Traditional and non
operational costs incurred in extending microfinancing services traditional cash crops would be cultivated for export and as raw
to the masses. The lower operating costs will translate into the material for domestic industry.
ability to serve more people. The plan will begin with a coconut plantation project from
the coastal areas of the Western, Central and Volta regions of
The road ahead Ghana. This initiative has been instituted in collaboration with
An additional one hundred thousand households will be covered the University of Cape Coast (Ghana) and University of Udine
in each of the ten regions of Ghana with microfinance in the near (Italy). Lack of adequate funding is still a hurdle here.
future. ASA Initiative intends to have it’s microfinancing activities
affect the whole community and the macro economy of Ghana. Investment in information capital - computerisation and
The organisation believes that in order to make the entire system networking of ASA Initiative’s branches
more effective microfinance initiatives should be linked to the Current and future microfinancing branches of ASA Initiative
positive impact and development of the clients, the communities would be computerised for effective MIS and loan tracking.
that the poor are part of and the economy within which they Growth challenges would be overcome through the establishment
live. This has a give and take effect. Positive development has a of robust MIS therefore the quality and the base of information
multiplier effect on the economic and social lives of the affected capital would be expanded for effective, efficient and economical
communities and the economy as a whole. microfinance delivery to cover the ten Regions of Ghana.
Establishment of Light Industrial Area Quality management and human capital development
As part of its microfinance project, ASA Initiative is collaborating Proactive development of human capital base of the initiative is
with the local Government to establish Light Industrial Area crucial to achieving professionalism. ASA Initiative is committed
for one of its main market segments, Forum for Small Scale to continue with the strategy of attracting, maintaining and
Business Association (FOSBA). The light industrial sector is a new motivating quality human calibre to combine with other corporate
community all together which is going to be developed. 153 acres resources in achieving maximum economy of scale for the benefit
of land has been acquired near a village called Mpeasem. The land of clients and other stakeholders.
has been surveyed and registered with the Local Government. The
demarcation, construction of roads, extension of electricity, water, Pension plan for microfinance clients
clinic and other social amenities are ongoing projects to be funded Liaising with investment companies to establish pension savings
by the Central Government through the Local Government. This for clients is next on the agenda of the Initiative. Discussions have
has been done to reduce the cost of land per client. been ongoing with Data Bank Group, a large investment company
Further development work has been delegated to ASA in Ghana, to establish a quasi long-term mutual investment
Initiative. Workshops, stores, office buildings and residential fund for microfinance clients into which small monthly savings/
buildings would be constructed to economically establish the investments, as a security for their old age would be contributed
productive poor from the rural areas and poor migrants from into. This initiative would begin during the last quarter of 2009
the city centres. The very poor or the poorest of the poor would to cushion clients living during the time of their life when they
be assisted with microfinance to own a residential house(s) to have retired from active business.
generate sustainable rent income for living. Microfinance plus
business establishment would be the focal step. ASA Initiative’s Future of the microfinance sector in Ghana
microfinance branch would be at the centre of the site to cater to A majority of productive Ghanaian women have meagre incomes
the needs of the clients. The philosophy is based on focusing on and live in abject poverty, ignorance and struggle for one square
the success of the clients. meal a day, lack clothing, shelter and other basic necessities.
It is expected that the pilot project would be replicated in all Even though it is expensive for financial institutions to maintain
the other nine regions of Ghana. This will positively contribute to electronic accounts for them, they are bankable provided an
the new community in terms of jobs, improvement of economic effective methodology is employed. However, these poor
condition and overall well-being of the target group. The ultimate productive households normally rely on the mercy of local money
goal would be positive contribution to the GDP annually. lenders who charge exorbitant interest rates ranging between 10%
to 100% per month. The resultant effect is the perpetuation of
Cultivation of cash crops for export and debt burden which finally erodes their businesses and thereby
domestic industry increasing the poverty burden on the households.
About 70% of the population of 20 million Ghanaians are Microfinance has now become a household word in Ghana.
engaged in agriculture and most are at the subsistence level and Every household is talking about microfinance as a means of
they reside in rural areas. They are under the grip of poverty and achieving sustainable livelihood. Hence, it is clear to see that
its concomitants on the livelihood of these households. The break there exists a large market for microfinance which is yet to
of the poverty chain is in the mirror of developing the economic be reached.
June 2009 | www.i4donline.net
21

The Government of Ghana has identified microfinance as member organisations. GHAMFIN has set up a sub-unit ASSFIN
one of the main tools for poverty reduction, in promoting Small as part of it’s effort to gradually improving its capacity to support
and Micro Enterprises and private entrepreneurs into middle the member micro-finance institutions effectively. This came up as
income level by the year 2020. The Government has therefore a result of commercial financial service providers such as Financial
been creating enabling legal and regulatory framework to enhance Service Companies, Savings and Loans Companies and some Rural
future operation of microfinance activities in the country. This Banks entering into the microfinance arena. An effective leadership
would augment ASA Initiative’s activities in poverty alleviation is crucial to the future of microfinance in Ghana.
and economic development. With the introduction of microfinance as a diploma
As part of its vision 2020 and poverty alleviation strategies and degree courses at the University of Cape Coast, Ghana,
the Government often collaborates with local microfinance more research work would be undertaken in microfinance in
institutions, mostly FNGO’s and Rural Banks to implement the near future which aim to serve as a basis of industry growth
Government initiated microfinance activities for some sections and improvement. Integration of ICTs in microfinance is
of the deprived populace. Some of these projects include envisaged to boost the future growth of microfinance initiatives
Microfinance and Small Loans Centre (MASLOC), Emergency as a whole.
Social Relief Programme (ESRP), Poverty Alleviation Fund, Local
Initiative Fund etc. The goodwill of the Government of Ghana in
embracing microfinance as major tool for poverty reduction has
mirrored a very bright future for the industry. The industry is a Veronica Agodoa Kitti
fast growing one with large numbers of people underserved due Managing Director
to low capital base of the players of the industry. ASA Initiative
The umbrella organisation of microfinance, Ghana Micro- Ghana
finance Institutions Network (GHAMFIN), has been undertaking asainitiative@yahoo.com
structural reorganisation to effectively oversee the activities of
RBI goes rural with SHGs
Reserve Bank of India (RBI) plans to Incidentally, although PACs are in the banks have proven their ability to
engage self help groups (SHGs) and principal allowed to work as business manage accounts and handle money. The
primary agriculture credit societies correspondents, they are not being used local flavour of the
(PACs) as business correspondents (BCs) for this purpose. Concerted efforts may be SHGs and their intimate knowledge
to ensure greater banking penetration made for using PACS as BCs where such of the areas in which they operate as
in the country’s interior rural belt. PACS are functioning also their association with banks make
The banking regulator has decided to them a good choice to act as business
make use of the banking correspondent correspondents, the report said, adding
model extensively to provide banking that RBI might consider allowing banks
facility to some 1 lakh unbanked to use mature SHG group leaders as BCs
villages of population in excess with IT solutions in place to ensure
of 2,000. requisite safeguards.
RBI Deputy Governor Usha At present, banks are treading
Thorat recently said the central with caution in using business
bank would have like banks correspondents widely. Some quarters
to achieve the target by 2011. have voiced concerns over the
Besides trying to fulfil the target safety features and possible misuse
in time, RBI said the focus would of this model.
also be kept on maintaining quality In this light, the banking regulator
of banking services. in its annual policy review of 2009-10
Banking penetration doesn’t mean has announced that it would form a
merely opening of bank accounts. Banks group to review the eligibility of persons
need to ensure that account holders use who can act as BCs. It has underscored
their bank accounts purposefully. We the need to take into account the
would also like banks to offer credit reasonably well, the RBI has recently said experience of a few large BCs, the need
facility, insurance cover and remittance in its draft report on lead bank scheme. to facilitate recycling of cash, apart from
facility to rural account holders, Ms Likewise, the report observed that SHGs the regulatory and consumer protection
Thorat has recently said. which have been successfully linked to perspectives.
i4d | June 2009
22

Microfinance News
downturn. “MSMEs are facing a slump in their requirements from the MSME
demand for exports and services, besides sector. The ministry is likely to hold
a build-up of large inventory, delayed meetings with the government in the
payments and slowdown in remittances. near future to discuss various issues and
She also pointed that MSMEs are the problems faced by small and micro units
“worst sufferers” when a disaster strikes. in the country.
Hence, these sectors must be provided “About 42 million people are employed
relief on the lines of the National Equity in the MSME sector in India, contributing
Fund as recommended by the Chakraborty heavily to the country’s total industrial
Information for development Committee. output and exports. Evidently, the segment
www.i4donline.net Indicating the government’s initiatives plays a major role in the economic growth
towards the same, Usha said, “RBI had of the country. With the government
taken unprecedented’ measures to ensure planning to take measures to provide
Farm credit likely to be liquidity and credit flow to MSMEs to help support to the MSME sector, growth of the
enhanced in India the sector during the recessionary period national economy is likely to get a boost,”
With inclusive growth as the buzzword, the now and a special refinance facility under says H Shivdas, proprietor of a small-scale
Government of India is likely to enhance Section 17 (3B) has also been extended apparel exporting firm in Trivandrum,
farm credit by nearly Rs 50,000 crore, to them.” Thorat also indicated that the Architha Exports.
enlarging the scope of subsidised credit to regulator has granted in-principle approval The government is also planning to
over 5 crore farmers across the country. for setting up to four credit information bring about reforms in the Khadi sector,
During a meeting of Finance Minister agencies to ensure better credit disbursal which has significant MSME presence.
Pranab Mukherjee with heads of public and monitoring. Furthermore, it intends to launch the
sector banks, the former emphasised that As per RBI guidelines, it is mandatory different schemes recommended by the
banks should increase spending on labour- for domestic commercial banks (public National Manufacturing Competitiveness
intensive sectors such as agriculture to and private sector) to provide 40 percent Council (NMCC) to enhance productivity
boost the purchasing power of people. of Adjusted Net Bank Credit (ANBC) to of MSMEs.
Though the Minister remained tight- priority sector, which includes agriculture
lipped on sectoral targets for banks, sources and micro, small and medium enterprises. Sage India launches payroll
said farm credit would go up by more than A recent finding revealed that major banks software for SMEs
16% this year bringing under its cover an failed in achieving agri-advance targets Software solutions provider Sage India
additional 50,000 people from 4.5 crore until November 2009. The list includes launched its payroll software designed
earlier. In the 2008-09 fiscal ending March major banks - Bank of Baroda, Oriental for small and medium businesses to
31, total farm credit was Rs 2.80 lakh Bank of Commerce, United Bank of India, help companies with their salary-
crore which is expected to go beyond Rs Corporation Bank, Union Bank, Punjab related operations. The Payroll software,
3.25 lakh crore this year. It is believed that and Sind Bank and Syndicate Bank. ‘Sage Pocket’ comes in two versions
the Congress-led UPA government would — professional and premium — along
bring down the existing rate of interest for New government bringing in with online modules available as add-ons.
agriculture credit hovering around 9%. new hope for MSMEs The Sage Pocket Professional solution
Even after a 2% government subsidy, the The MSME sector in the country might is configurable and allows the user to set
rate is still at a high of 7%. get fiscal aid from the government soon. statutory regulations, calculate income
The newly formed government, led by tax, track reimbursements and generate
RBI asks banks to review the United Progressive Alliance (UPA), pay slips. Employee master details can be
MSME lending policy is focused on addressing the credit maintained with the option to upload all
Speaking at the one-day conference requirements of this cash-strapped sector. the necessary documents. Sage Pocket
on ‘Learning from recession, saving an In the next few months, the government has been simplified for Partner network
economy: Towards an MSME agenda’, hopes to evolve mechanisms and structures of Sage to easily sell and implement it for
Usha Thorat, deputy governor, RBI, to ease credit access to the MSME sector their customers
asked the banks to review their credit which is largely unorganised. It has Further, the Sage Pocket Premium
policy towards micro, small and medium proposed a separate fund for enterprises solution is an advanced version for multi-
enterprises (MSMEs). in the unorganised segment which the user, multi-firm and for up to 1,000
Acknowledging the importance of Ministry of MSME would push for in the employees. With a starting price of Rs
sector, she said, “About 12.8 million coming months. 25,000, Sage Pocket is now available with
MSMEs provide jobs to over 300 million In a bid to help MSMEs further, the all authorised partners of Sage. Meanwhile,
people and account for 39 per cent of the ministry would also propose a ‘Procurement Sage Pocket’s set of modules available
manufacturing sector output and 33 per Policy’. Once this policy is implemented, online enable employees to have an online
cent of exports.” Thorat reasoned that targets would be set for the government access to information relating to human
MSMEs have been badly hit by economic departments and organisations to source resources, leaves and claims.
June 2009 | www.i4donline.net 23

??????/
Snapshots of micro
Mahila Sphurthi
Developed by: CoOptions
A scalable product cum solution for banks, NBFCs,
NGOs and private enterpreneurs who are in the space
of micro-finance.
http://www.cooptionstech.com/Mahila%20Sphurthi.aspx
Mahakalasm MIS
Developed by: Ekgaon Technologies
The MIS will allow central tracking
of the accounts, financial position,
loan repayment performance and
related information for a community
of SHGs.
http://www.ekgaon.com/MIS
Financial Accounting and Management
Information System (FAMIS)
Developed by: BASIX’s software partner, Sathguru
Management Consultants
It was designed to be a comprehensive solution for
accounting and management information needs.
http://www.sathguru.com/index.php
i4d | June 2009
24

ofinance solutions
Banksoft
Developed by: Processware Systems, Bangalore
A software that enables branch automation,
head office consolidation, and inter-branch
reconciliation. A user-friendly software package,
BankSoft provides integrity, flexibility and
security to the user.
http://www.processwaresystems.com/banksoft_main.htm
MIFOS
Developed by: Grameen Foundation’s Technology
Centre
Mifos is a centralized management information
system (MIS) platform featuring a user-friendly
browser-based web interface running on top of
a robust MySQL database. The open source
framework allows microfinance institutions
to select local developers to assist with the
customisation, implementation and maintenance
of their software
http://www.mifos.org/
Financial Information Network and
Operations (FINO)
Promoted by: ICICI Bank
FINO is a biometric enabled multi-function card
for end users which can be part of a portable system. It
will offer the advantages of a smart card, point of sales
terminal advantages for the front end services, banking,
software performance and reporting MIS for back-end
as well as information services to all MFIs.
http://www.icicifoundation.org/cs_fino.html
June 2009 | www.i4donline.net
25

ACCOUNTING SYSTEM IN ORISSA PANCHAYATS
e-Cashbook in Orissa
panchayats
Computerisation has been introduced deployed in each Block Panchayat. Usage for Block and DRDA. PAMIS is a tool
in District Rural Development Agency audit of the system confirmed that the for Non-Profit organisations engaged
(DRDA) and Block Panchayat level to system was prone to wrong entries by the in development work. PAMIS helps
maintain transparency and accountability semi-skilled Block Cashier. In order to plug Non-Profit Government organisations to
in administration and finance. To start with the loophole in the system and to prevent implement their projects and programmes
the process a small tool namely PRIAsoft incorrect entries an Enterprise-level double in a timely manner and within the available
(Panchayati Raj Institutions Accounting entry accounting package was envisaged. budget. PAMIS, also helps the Project
Software) was developed by National This application was also mandated to Directors plan and monitor all aspects of
Informatics Centre, Orissa State unit. It capture the daily financial transaction and their projects and their programmes.
captures the month-wise/scheme-wise prepare the abstract report for monitoring Designed to manage core financial
accounts inflow and outflow in shape of a number of anti-poverty schemes/ and physical aspects, PAMIS is easy to
cash, bank, treasury and advance of the programmes. Therefore, it was decided to install and implement. PAMIS manages
3-tier Panchayati Raj Institutions i.e. use accounting software available in the all accounting needs of an organisation
Gram Panchayat, Block Panchayat and market. These accounting packages are effectively. All routine features of
Zilla Panchayat. As a result, at the end of targeted at small trading, manufacturing accounting are built into the software. To
each month the funds flow statement of units. Apart from accounting, they offer maintain the daily financial transaction at
3-tier PRIs is available. After the successful features such as costing, sales and inventory the Block and DRDA level, PAMIS has
deployment of PRIAsoft, further need- management. However, there are hardly been implemented in all the 344 block
based projects were taken up within the any solutions available for Non-Profit/ and DRDA locations and the manual Cash
availability of funds for better benefit of Government organisations like Block Book has been replaced by Computerised
the rural poor. and DRDA. During this process, Xavier Cash Book.
This exercise was started during 2003- Institute of Management, Bhubaneswar
04 by computerising the Block Panchayat. offered a solution to provide an application The software can be operated in
Two desktops and a Computer Programmer namely PAMIS (Project Accounting the following environment
having B.E and MCA qualification were and Monitoring Information System) Operating environment:
• Server operating system: Any operating
system that supports Oracle database
• Database: Oracle RDBMS
• Client operating system: Windows 98,
Me, 2000 or xp
• Graphic User Interface: Developer
2000 runtime
Platform:
• Online Web-based version deployed
• Offline batch processed Standalone
version deployed
What is PAMIS?
The version of PAMIS used by the
Department of Panchayati Raj is
called Panchayat Accounts Monitoring
Information System. It is capable of
capturing daily financial transaction of
PAMIS Training Programme in Sundergarh District DRDA/Block based on the double entry
i4d | June 2009
26

accounting system. To start with PAMIS, Master Data for
Accounts, Budgets and Projects are to be initialised, which was
initially bundled in the software by Panchayati Raj Department,
Govt. of Orissa before installation in the Blocks and DRDAs.
Then daily financial transactions are entered in 3 types of
vouchers designed by Panchayati Raj Department, Govt. of
Orissa. These 3 types of vouchers are Receipt, Payment and
Journal. For ease of use, the manual vouchers have been colour-
coded, green for receipt, red for payment and yellow for journal
(advance adjustment) vouchers. Block Cashier prepares the
manual vouchers based on the daily financial transaction and
enters the data into the package. Then the software takes care of
the generation of cashbook, journals, consolidated cashbook of
Panchayat Samiti (Schemes) and Government (Salaries including
PAMIS is implemented in Phulbani Block of Kandhamal District
Teachers’ salary), separate cashbook for Panchayat Samiti and
Government, subsidiary cashbook for all schemes under Panchayat
Samiti, advance ledger, balance sheet, receipt payment statement, • Financial performance monitoring
income expenditure statement and so on. Impact analysis:
Currently, PAMIS is operational in 314 Block Panchayats and 30
Zilla Panchayats in Orissa.
• PAMIS generated cash-bank book is official.
• There is no manual cashbook in Block or DRDA of the
State.
• PAMIS generated reports are Comptroller and Auditor
General compliant.
• Chartered Accountants, Auditors are using PAMIS-generated
receipt payment statement for making audit reports of Blocks
and DRDAs.
• It is also developed in accordance with the Panchayat Samiti
Accounting Procedure Rule of the Government of Orissa.
Implementation procedure
The chief architect of PAMIS is Professor Gopal Krishna Nayak
PAMIS Screenshot Director, IIIT (Ex-professor of XIM, Bhubaneswar) who never
thought that a semi-skilled Block Cashier will implement this
software by understanding the Golden Rule of Accounting
Functional features of PAMIS are enumerated below: Panchayati Raj, Orissa
• PAMIS is an accounting software Simplification of Accounting Procedure in PAMIS
• PAMIS is a project planning software
Accounts Head Debit (Dr) Credit (Cr)
• PAMIS finds true expenses for a project not it’s
Asset Increase ( ) Decrease ( )
allocated costs.
Liability Decrease ( ) Increase ( )
• PAMIS treats a project as a complete accounting entity not
Income Decrease ( ) Increase ( )
merely a cost centre.
Expenditure Increase ( ) Decrease ( )
• PAMIS monitors project financials
• PAMIS monitors physical activities of projects
• PAMIS ensures transparency, accountability and Procedure. According to him “PAMIS is a dream project for us, the
responsibility challenges of getting accounts done by non-accountants, getting a
• PAMIS is a tool to obtain success in project planning, transparent system accepted by block-level functionaries, usage of
monitoring and execution technology by non- technocrats are stupendous. However, when
PAMIS was used by all Blocks and DRDAs in Orissa, it became
Modules of PAMIS are as follows:
• Double entry accounting
Golden Rule of Accounting Procedure incorporated in PAMIS
• Project-based accounting
Rule 1 : Debit what comes in, Credit what goes out
• Location-based accounting
Rule 2 : Debit the receiver, Credit the giver
• Physical activity monitoring
Rule 3 : Debit all expenses/losses, Credit all incomes and gains
• Financial budgeting
June 2009 | www.i4donline.net
27

the very first enterprise software that was rolled out on such a • Once this data is uploaded on to the PRIASoft portal, the
large scale in the government sector.” citizen-centric reports are available in the public domain.
He devised a simple procedure and advised all Block Cashiers Once PAMIS is uploaded online for all Blocks and DRDAs,
to keep this procedure beneath their table glass and keep it in at the end of each day anybody can analyse the progress made
their mind while preparing manual vouchers before entering the of each block. However, on pilot basis, some blocks of Cuttack
data into the computer. District and Kandhamal District are implementing PAMIS in
Gaining from his vast experience and strong willingness of online mode. After success of this pilot, the same will be rolled
high-level Administrators at the State Panchayati Raj Department, out for all Blocks and DRDAs. These facilities are not available
a training calendar was made and trainings were conducted at in the accounting softwares available in the market.
District Headquarters with separate resource persons having
expertise in IT and Accounts. Cost Accountants, Chartered Conclusion
Accountants, IT Specialists travelled throughout the State and This mammoth task is operating successfully at Block and
imparted training to officials starting from Project Directors, DRDA level with the help of all stakeholders of Panchayati
DRDA, Block Development Officers, Head Clerks, Computer Raj Department, Government of Orissa starting from Gram
Programmers to Cashiers. Hands-on training to generate cashbook Panchayat, Block Panchayat, Zilla Panchayat to State. The
from PAMIS was imparted to these officials. recognition of e-Cashbook as the official cashbook of the
state of Orissa has created a desire among all stakeholders to
Special Features of PAMIS : accomplish its requirement for efficient and desired benefit of
The PAMIS software has three dimensions i.e. Accounts, Projects rural India in time.
and Location.
• It has the capability to consolidate block-wise data to
prepare district-wise accounting reports and structured
MIS reports.
• Besides three types of transactions i.e Receipt (either Bank or
Cash), Payment (either Bank or Cash), Journal, two new types
of transactions were innovated. One is Receipt Mixture (RC)
that captures both cash and bank receipts in one transaction.
The other one being, Payment Mixture (PM), which captures
the financial transactions involving both bank and cash
disbursement and adjustment of advances.
• The consolidated cashbook in PRIASoft format is generated
through PAMIS at the end of each month and is transmitted Shreemanta Kumar Samal Sanjay Prakash Sahoo
to the PRIASoft portal of National Informatics Centre IT Specialist and MIS Nodal Vice-President (Operations)
through file transfer protocol (ftp) from the stand alone Officer, NREGS Cell, Panchayati CSM Technologies Ltd.
desktop computers of Blocks and DRDAs. Raj Department, Govt. of Orissa
atom technologies signs up with Sahayata
atom technologies, an Indian mobile women become self-employed and repayment collection. atom’s mobile
payments service provider has joined operate small businesses to support based m-Collections solution provides
Sahayata, a Micro-finance Institution their livelihood. Since these women are better reach to these geographical
(MFI) headquartered in Udaipur city located in remote rural areas it often locations by using mobile connectivity.
in Rajasthan, India, recognised for Sahayata’s employees carry Java
working in the area of socio-economic MIDP 2.0 mobile handsets with m-
development of women from weak collection application loaded in it.
economic backgrounds. atom’s m- This application helps them to connect
Collections solution model will directly with the backend operations of
provide Sahayata with a fully developed Sahayata on real-time basis to fetch the
mobile solution for distributing customer data for providing efficient
loans and managing collections of and cost effective service. This has
loan repayments. been possible because these remote
Sahayata provides micro loans becomes difficult for Sahayata to reach locations are well connected with
to rural women with an aim to help them for disbursal tracking and loan mobile coverage.
i4d | June 2009
28

MICROFINANCE AND GENDER EQUITY
Money for women
by women
This article Why target women? covered in the report, 970 are in Sub-
Traditionally, women have been facing Saharan Africa, 1,677 are in Asia and the
looks into the discrimination in access to credit and other
financial services. Commercial banks often
Pacific, and 579 are in Latin America and
the Caribbeans.
role of MFIs focus on men and formal businesses and
neglect women who make up a large and Africa
in empowering growing segment of the informal economy.
On the other hand, microfinance often
According to the World Bank’s International
Finance Corporation (IFC), women own
women to get targets women as 85 percent of their clients
are women. Therefore, targeting women
about 48 per cent of all enterprises in
Africa. Around 61 per cent of borrowers
out of poverty borrowers makes more sense from the
public policy standpoint. From a business
among the reporting MFIs in Africa are
women. Unregulated MFIs serve the
and enable them point of view, it has been observed that
women clients register higher repayment
highest percentage of women borrowers
who represent just over 50 percent of
to contribute rates. They even contribute larger portions
of their income to household consumption
borrowers from African cooperatives,
63 percent of borrowers from regulated
in the nation’s than their male counterparts. MFIs, and 69 percent of borrowers from
unregulated MFIs. Among almost half of
development The global scenario the reporting unregulated MFIs, more than
The Microcredit Summit Campaign 2006 70 percent of the borrowers are women.
reported that more than 14.2 million One explanation for the variation is that
among the world’s poorest women had unregulated MFIs include NGOs and
access to financial services. Around 74 projects that specifically target women.
percent of the 19.3 million poorest women Most of the MFIs target clients groups
are served microfinance services. More that are most vulnerable such as women
than 3,300 Microfinance Institutions and or people with very low incomes.
(MFIs) have reached 133 million clients Some of the MFIs who changed the lives
by providing microloans in 2006. Out of women in Africa are:
of these 133 million clients, 93 million
were among the poorest when they took Kenya Women Finance Trust (KWFT;
their first loan and 85 percent of these http://www.kwft.org)
poorest clients were women. According to In 1981, a group of women came together
this report, 99.3 percent female clients are and formed the Kenya Women Finance
using solidarity lending methodology and Trust (KWFT), a microfinance lender
51 percent female clients use individual dedicated to women. Initially, KWFT
lending from MFIs. relied on limited donor funds and loans
By December 2007, the Campaign from commercial banks. Now it has
counted 3,552 MFIs were reaching more become the largest microfinance institution
than 154 million clients with ongoing loans. for women in East and Central Africa. In
Out of these, 106 million beneficiaries were 2006 alone, KWFT disbursed $52 million
among the poorest and 83.4 percent (88.7 in loans to its clients, managed $16 million
million) were women. in member savings and had more than
According to the Microcredit Summit 200,000 accounts in seven of Kenya’s eight
Ritu Srivastava Campaign Report 2007, of the 3,316 provinces. KWFT also provides medical
microfinance institutions that were insurance programme for its clients and
June 2009 | www.i4donline.net
29

Regional Breakdown of Microfinance Data
Region Number of Number of Number of Number of Number of Number of Number of
programmes total clients total clients poorest clients poorest clients poorest women poorest women
reporting in 2005 in 2006 in 2005 in 2006 clients in 2005 clients in 2006
Sub-Saharan 970 7429730 8411416 5380680 6182812 3422825 4036017
Africa 1677 96689252 112714909 74330516 83755659 63934812 72934477
Asia and
the Pacific 579 4409093 6755569 1760405 1978145 1258668 1384338
Latin America
& Caribbean 30 1287318 1722274 387951 755682 321004 621111
Middle East
& North Africa 81859552 92672298 68937309 78975943
3256 109815393 129604168
Developing
World Totals
39 55707 54466 13318 25265 7862 11765
North America
& Western Europe 21 3390290 3372280 76166 225011 47856 142873
Eastern Europe
and Central Asia 60 3445997 3426746 89484 250276 55718 154638
Industrialised
World Totals 3316 113261390 133030913 81949036 92922574 68993027 79130581
Global Totals
Source:: Microcredit Summit Campaign Report 2007
their families. For a yearly payment of about $60, KWFT On the other hand, TCP strictly targets women who live below
clients get policies to cover inpatient, personal accident and the poverty line. Both of SEF’s operations, MCP and TCP, utilise
funeral expenses. a methodology that has been adapted from that of the Grameen
Bank of Bangladesh. As of December 2007, MCP had 15,677
Pankop Women Farmers Forum active clients whereas TCP had served 30,063 clients. A vast
The Pankop Women Farmers Forum reflects the new face of majority of their clients have been women. Typical enterprises
microfinance in Africa. Pilda Modjadji, founder of the Pankop include hawkers of fruits and vegetables and new or used clothing,
Women Farmers Forum, started out with the goal of growing fruits small convenience shops, and dressmakers. On average, each
collectively and using the proceeds to supplement family diet, raise business employs 1.4 individuals, including the owner, on a
incomes and pay school tuition fees,. Today they are a group of full-time or part-time basis. By the end of March 2008, the
300 members who are determined to create an alternative source programme had served 47,560 self-employed clients with a
of employment in the village. The women, with agreement and principal outstanding of 57 million Rands. Since inception, SEF
support of traditional chiefs and municipal authorities, set up a has disbursed 437,064 loans for self-employment, to the value of
fruit and vegetable dehydration plant. The group got the funds 572 million Rands.
from local commercial banks because Thembani International
Guarantee Fund, a South African organisation created in 1996 Asia and the Pacific
by the US non-profit Shared Interest and the Swiss-based The microfinance structure in Asia varies significantly across the
Recherchés et Applications de Financements Alternatifs au countries, depending on the stage of financial development; the
Développement (RAFAD), put up $70,000 in loan guarantees. financial development and the economical development and the
With these funds, the women plan to meet European Union policy development. The International Finance Corporation (IFC)
health and safety standards and start exporting their produce. 2007 report states that the demand of financial services among poor
people is extensive in Asia. The microfinance movement in Asia is
Small Enterprise Foundation (SEF; http://www.sef.co.za) more focused on women; 98% of borrowers were women in Asia in
Founded in 1992, SEF is a not-for-profit, pro-poor microfinance 2006, as compared to 66% in Africa and 61.8% in Latin America.
institution based in the Limpopo province of South Africa. It manages some of the lowest average loan balance worldwide,
SEF aims to work towards the elimination of poverty and with a stronger social focus on the poor, presenting lower loan
unemployment. This is accomplished through two programmes, average values than in other regions; USD 151 in Asia in 2006,
the Microcredit Programme (MCP) and the Tšhomišano Credit USD 183 in Africa and USD 671 in Latin America. Grameen
Programme (TCP). MCP focuses on existing, but generally Bank in Bangladesh, Friends of Women’s World Banking, India
marginal micro-enterprises and provides them with microloans. (FWWB-I) and Sadhan in India, Tianjin Women’s
i4d | June 2009
30

Federation in China are some of the major MFIs initiated by Pro - Mujer (https://promujer.org)
women entrepreneurs. Pro Mujer is an international microfinance and women’s
development network, who’s mission is to provide Latin America’s
Friends of Women’s World Banking, India (FWWB-I; http:// poorest women with the means to build livelihoods for themselves
fwwbindia.org) and futures for their families through microfinance, business
In 1982, Friends of Women’s World Banking, India (FWWB-I) training, and healthcare support. The network also links women
was created as one of the first few affiliates of Women’s World and their families with existing resources and services in their
Banking. For the first seven years of its operations from 1982 to communities. The group has its network in Argentina, Bolivia,
1989, WWB’s activities were limited to providing loan guarantees Peru, Mexico and Nicaragua. In 2007, the group provided credit,
for poor women in the state of Gujarat. After modifying the healthcare and business training to 193,000 Latin American
byelaws in 1989, FWWB expanded its financial services for poor women and offered healthcare to approximately 965,000 children
women beyond the state of Gujarat. The scope of its activities in and extended family members. Pro Mujer also organises women
microfinance, as well as its geographical coverage, increased to into community banks of 20 to 30 women each who can apply
91 organisations in 12 states as on March 2006. FWWB India for loans as a group, disburse the money to members, and collect
has adopted a ‘Credit Plus’ approach and its current activities loan payments and savings deposits.The group offers a range of
include two broad programme areas. FWWB India has a Revolving loan products to meet the needs of poor women entrepreneurs.
Loan Fund, which serves to refinance partner organisations that The most common are working capital loans, which range from
provide financial services to the poor. FWWB India also supports US$50 to US$1,500 with a repayment term of four to six months.
these partner organisations through the provision of institutional Loans start small, US$50 to $100, and those women who repay the
development programmes to expand their capacity to manage loan on time qualify for larger loans. Pro Mujer recently developed
credit and savings activities. In addition to the above, FWWB has the Star Product (Producto Estrella) in Mexico, which gives larger
also been involved in micro insurance, supporting innovations in loans to longtime Pro Mujer borrowers, enabling them to scale
microfinance, etc. up their businesses more effectively.
Tianjin Women’s Federation (http://www.tjwbi.com/english/ La Fundación Boliviana para el Desarollo de la Mujer
aboutus) (FUNBODEM; http://www.funbodem.org)
The Tianjin Women’s Business Incubator (TWBI), a non-profit FUNBODEM is an affiliate of Women’s World Banking and
business incubator located in Tianjin, China, is dedicated to a member of the unregulated MFI association, FINRURAL.
promoting the growth and development of women-owned FUNBODEM is a non-governmental, non-profit organisation
businesses of all types in Tianjin. While there are over 400 business that was founded on July 15, 1987 - an initiative of a group of
incubators in China, TWBI is the only one which is focused women willing to support the provision of financial services to
on employment creation and empowerment of a disadvantaged help the low-income women of Bolivia come out of poverty.
community. The core mission of the centre is to provide long- The foundation’s objective is to improve the earning capacity of
term sustainable opportunity of employment for women. TWBI women and to enhance their role in society. FUNBODEM only
believes that the best way to help women entrepreneurs and loans to women, and they require all clients to put their savings
women employees to have good opportunity of employment is into guaranteed deposits.
to provide assistance and help women enterprises that are in the
infancy and development stage. In Tianjin, more than 50 laid-off Conclusion
women have carved out their own businesses with the centre’s help. Realising the fact that a high percentage of women are among the
Recently, the centre received a donation of USD 200,000 from the poorest of the poor. Microfinance could be one of the solutions to
World Bank to equip the centre with information communication help them expand their horizon and offer them social recognition
technology (ICT) tools. and empowerment. The question is not whether we should focus
on women or men. Both play a vital role in generating income
Latin America and the Caribbeans and managing the social economy. Their capacity for innovation
By the end of the financial year 2005, microfinance in Latin stimulates general economic growth. Microfinance programmes
America including the Caribbeans maintained its steady pace both should be accessible to both genders and offer adequate access to
in terms of scale and outreach while MFIs kept their commitment financial services, training and technical assistance. Short-term
to serve the lowest income sectors. In 2004 and 2005, the outreach assistance programmes like providing credit, technology and
of microfinance institutions were increased by 20 percent of total skills enhancement training programmes, etc., will increase the
and 5.2 million borrowers with loan worth approximately US$ productivity of women’s labour.
5 billion. According to the Microfinance Information Exchange, Which will, in turn, increase their longterm productivity and
Inc.’s (MIX) report ‘Benchmarking Latin American Microfinance access to productive resources, creating social, technological and
2005’, 40 percent of women are actively participating in economical mechanisms to reduce conflicts between women’s
microfinnace activities. In 2007, 34% Latin Americans were poor productive and reproductive roles. An ideal microfinance
and 13% lived in extreme poverty. Pro mujer and FUNBODEM programme should consider women in a broader context, as
(La Fundación Boliviana para el Desarrollo de la Mujer) are two the nucleus of a family, that is vital for societal improvement
major MFIs working for women empowerment. and progess.
June 2009 | www.i4donline.net
31

ZERO MASS FOUNDATION
Development
initiatives
ZERO Microfinance and Savings Support Foundation (ZERO The ZERO platform is based on new generation mobile
MASS Foundation/ZMF) has been a pioneer in the field of phones and Fingerprint authentication which converts new
Financial Inclusion space as a Business Correspondent (BC) to generation low-cost NFC (Near Field Communication) mobile
25 Banks in India including the State Bank of India (SBI). ZMF phones with large storage capacities as a secure, self-sufficient
helps banks increase their outreach in ‘Rural Unbanked India’ bank branch, with biometrics based customer ID, for customer
through its Customer Service Points (CSPs) working as village enrollments for no-frills accounts and all types of transactions in
branches using the Branchless Banking technology. A.Little.World the village with the local Customer Service Point operator acting
Pvt. Ltd. (ALW) is the technology provider for all the banks who as a Teller. Existing Mobile communications networks are used
have engaged ZMF as a BC. ALW provides the technology as a for all transaction uploads, downloads and application updates.
service to Banks under its brand “ZERO”. The platform ensures that Banking facility is provided to the
ZMF creates the last mile operations network in villages, right people at the right time and the right amount of money is
under pre-defined service agreements with Banks and front-ends transacted. The CSPs are equipped with a mobile phone and a
the delivery of full-featured transactional services on behalf of Fingerprint Scanner cum Receipt Printer to carry out Banking
Banks for Financial Inclusion on the ground. ZMF, a Section and Payment transactions (i.e. Cash Deposit, Cash Withdrawal,
25 Company closely affiliated to ALW provides field operations Account to Account Transfer, Balance Enquiry, Mini Statements,
for the ZERO platform. ZMF manages the field force, account etc.) using both online connectivity to Banks and in an offline
creation, appointment of Customer Service Points (CSPs), mode (with daily batch settlements). The main features of the
management of cash and other logistics at the last mile. ZMF ZERO platform are:
in turn collaborates with strongly placed local organisations, • Mobile phone as core Bank branch
district and state administration to ensure smooth deployment • Smart cards not needed for biometric authentication in local
and operations. service area
As per a typical agreement between ZMF and a bank, ZMF’s • Mobile phone used for opening accounts on-the-spot by
scope of services include: local CSP
• Enrolment of customers for no-frills zero-balance savings • Voice prompts during enrolment and transactions
accounts and other account types that may be specified by • Printout of each transaction
the Bank. The platform employs biometrics based ID, RFID smart cards,
• Enrolling, training and equipping of Customer Service Points and NFC (Near Field Communication) mobile phones as
(CSPs) in villages to provide various kinds of transaction acceptance and enabling devices (with merchants, field forces of
services including but not limited to cash deposit, cash MFIs and as cashless ATMs).
withdrawal, transfer of money, payment of utility bills, The ZERO platform can be easily deployed for the following
disbursal of loans, collection of loan instalments, and cashless services:
payments at local and remote merchant establishments. • Biometric Identity
• Engaging the CSPs to provide enrolment services for opening • Cash deposit
no-frills account • Cash withdrawals
• Engaging the CSPs to provide various kinds of transaction • Money transfer
services including but not limited to cash deposit, cash • NREGA / Pensions
withdrawal, transfer of money, payment of utility bills, and • Micro Credit
disbursal of loans and collection of loan installments. • Micro Insurance
• 3rd party cash collection • Cashless Payment
• Cashless payments at local and remote merchant • Utility Payments
establishments. • SHG Utilities like Disbursals, Repayment and Record of
• Management of cash Attendance
• Lending activities on behalf of the Bank (as an MFI) Other As evident from the platform’s applications, ZERO MASS
service as may be advised by the Bank in writing to ZMF, Foundation (ZMF) also works closely with Government
and which ZMF agrees to perform Departments to ensure that the exact amounts of Government
i4d | June 2009
32

benefits reach in time to the rightful B. The CSP in a village can enroll
beneficiaries for Government customers using the same mobile device
programmes like NREGA (National that is used for carrying out transactions
Rural Employment Guarantee Act), with an easy to use graphical interface
Social Security Pensions (SSP), C. Use of both online and offline
Scholarships, Housing Grants, etc. methods of transactions
Bank accounts are opened for all such
Government beneficiaries by ZMF. ZMF has expanded its operations in
ZMF also helps Government 19 states with more than 8,000 CSPs
departments to automate processes covering more than 16,000 villages.
such as Attendance and Job Demand About 4 million customers have been
for NREGA using the beneficiary enrolled under the Financial Inclusion
fingerprint authentication and programme. Multiple State Governments
by ascertaining the GPS (Global are disbursing their NREGA wages and
Positioning System) co-ordinates of Social Security Pensions using the
the work sites. ZERO system at the CSPs of ZMF.
ZERO Platform has been built as ZMF actively works towards improving
a cost effective method for Banks to commercial viability of CSPs by offering
extend all their products and services multiple products and services through
such as Savings, Loans, Recurring the ZERO platform.
Deposits, etc., to customers. The A major hurdle in scaling up of the
platform is also built as an easy to use option of illiterate and operations is to find the right business model for commercial
semi-literate population in villages with features like Graphical viability of all stakeholders in the ecosystem, e.g. Customer Service
User Interface and Voice Guidance. Point (CSP) operators, Banks and ZMF. ZMF is constantly
ALW and ZMF have done many innovations to bring down working with all the partner institutions to arrive at the right
cost of operations for banks as well as for rapid scale up of commercial models in all specific geographies of India.
operations. Few examples of such innovations are: Lokanath Panda
A. ZERO platform can be used by customers without using Co-Founder and Director,
expensive Smartcards ZERO MASS Foundation and A.Little.World Pvt. Ltd.
FTK Technologies implements vernacular interface in government schools
FTK Technologies co-branded product, Magikeys, indicates the direct influence on learning across the board.
developed with FTK’s LooKeys software, is changing the face of “Even teachers of subjects such as physics and science are excited
computing in government schools. The software, co-developed now to use aids such as power point presentations, which could
with the computer education vertical, Educomp Solutions, not used so far, as teachers were restricted to English in almost
is specifically oriented to the needs of Indian Government every aspect when working with computers” Palgi explains. “As
schools, allowing both Students and Teachers all across India to this was part of our vision when creating Magikeys, it gives us
enjoy computing experience in their mother tongues through immense pleasure to see how we are helping to create a new
an intuitive and easy-to learn interface, using the technology generation of young computer users, using computers in their
of FTK’s flag ship product- LooKeys. own mother tongue. Our commitment is, and will always
“We took into consideration the fact that most government remain, to help bring the computing experience to the entire
schools aspire to introduce their students to the world of people of India. MagiKeys, which was specifically created for
computers, but face obstacles due to language barrier and the the next generation of users, is maybe the most important step
familiarity and preference of the students with their mother towards achieving that goal.”
tongue” said Rafi Palgi, FTK Executive Manager “Based on One emphasis that was implemented in Magikeys was a
the expertise and experience of our partners in Educomp, fully functional Offline interface that would enable teachers
we created a special interface that will function similarly as and students to use MS-OFFICE and other Unicode
our comprehensive software, LooKeys, and that will enable compliant applications in their own languages. In schools that
computer-aided teaching and learning in Indian languages. enjoy internet connectivity students can also write mails, chat
Educomp, as the market leaders in computer education, along and surf the net in their own language using MagiKeys.
with their devotion and passion to this cause, are the most The product is used by Government Schools across the
qualified partner to take this revolution and implement it in the nation, and has proven to be a priceless tool for the next
field.” Feedback received from the schools using the software generation of computer education.
June 2009 | www.i4donline.net
33

BEST MICROFINANCE INSTITUTIONS
Forbes magazine’s
top 50 MFIs
The first-ever list of the World’s Top 50 Microfinance Institutions selected by Forbes were chosen from a field of 641 micro-credit
providers in the year 2007. This list was prepared by Microfinance Information Exchange (www.themix.org). To qualify, the institutions
must have made available their audited financials and must have passed a review by a Forbes panel of advisors.
The table gives the rank (out of 641) for the top institutions according to scale, which is based on the size of their gross loan
portfolio; efficiency, which considers operating expense and the cost per borrower as a percent of the gross national income per capita
of their country of operation; risk, which looks at the quality of their loan portfolios, measured as the percent of the portfolio at
risk greater than 30 days; and return, which is measured as a combination of return on equity and return on assets. Each category is
equally weighted for an institution’s overall ranking
Rank Name of MFI Country Scale Efficiency Risk Returns
1 ASA Bangladesh 14 83 56 40
2 Bandhan India 108 49 42 1
3 Banco do Nordeste Brazil 46 27 213 25
4 Fundación Mundial de la Mujer Colombia 58 72 193 1
Bucaramanga
5 FONDEP Micro-Credit Morocco 119 26 196 1
6 Amhara Credit and Savings Institution Ethiopia 56 126 118 42
7 Banco Compartamos, S.A., Institución Mexico 15 24 295 11
de Banca Múltiple
8 Association Al Amana for the Promotion Morocco 17 212 133 1
of Micro-Enterprises Morocco
9 Fundación Mundo Mujer Popayán Colombia 53 181 141 1
10 Fundación WWB Colombia - Cali Colombia 27 206 155 4
11 Consumer Credit Union ‘Economic Russia 82 300 19 1
Partnership’
12 Fondation Banque Populaire pour le Morocco 59 126 219 1
Micro-Credit
13 Microcredit Foundation of India India 75 142 7 185
14 EKI Bosnia and 102 242 1
66
Herzegovina
15 Saadhana Microfin Society India 263 79 73 1
16 Jagorani Chakra Foundation Bangladesh 136 176 128 1
i4d | June 2009
34

Rank Name of MFI Country Scale Efficiency Risk Returns
17 Grameen Bank Bangladesh 8 280 100 62
18 Partner Bosnia and Herzegovina 64 169 230 1
19 Grameen Koota India 209 106 156 1
20 Caja Municipal de Ahorro y Crédito de Peru 48 99 222 119
Cusco
21 Bangladesh Rural Advancement Bangladesh 10 159 126 205
Committee
22 AgroInvest Serbia 84 195 222 1
23 Caja Municipal de Ahorro y Crédito de Peru 20 163 220 101
Trujillo
23 Sharada’s Women’s Association India 229 207 55 13
for Weaker Section
24 MIKROFIN Banja Luka Bosnia and Herzegovina 60 240 205 1
25 Khan Bank (Agricultural Bank of Mongolia 19 149 280 59
Mongolia LLP)
26 INECO Bank Armenia 96 173 202 39
27 Fondation Zakoura Morocco 51 268 194 1
28 Dakahlya Businessmen’s Association for Egypt 200 215 102 1
Community Development
29 Asmitha Microfin Limited India 80 254 73 111
30 Credi Fe Desarrollo Microempresarial S.A. Ecuador 28 252 206 34
31 Dedebit Credit and Savings Institution Ethiopia 50 246 80 154
32 MI-BOSPO Tuzla Bosnia and Herzegovina 128 120 283 1
33 Fundacion Para La Promocion y el Nicaragua 173 89 171 100
Desarrollo
34 Kashf Foundation Pakistan 123 194 219 1
35 Shakti Foundation for Disadvantaged Bangladesh 170 221 151 1
Women
36 enda inter-arabe Tunisia 198 90 257 1
37 Kazakhstan Loan Fund Kazakhstan 120 118 320 1
38 Integrated Development Foundation Bangladesh 300 134 140 1
39 Microcredit Organisation Sunrise Bosnia and Herzegovina 114 103 341 17
40 FINCA-ECU Ecuador 125 138 264 54
41 Caja Municipal de Ahorro y Crédito de Peru 23 126 220 215
Arequipa
42 Crédito con Educación Rural Bolivia 135 152 298 1
43 BESA Fund Albania 109 135 345 1
44 SKS Microfinance Private Limited India 61 395 141 1
45 Development and Employment Fund Jordan 83 388 135 1
46 Programas para la Mujer – Peru Peru 292 82 242 1
47 Kreditimi Rural i Kosoves LLC (formerly Kosovo 213 158 247 1
Rural Finance Project of Kosovo)
48 BURO, formerly BURO Tangail Bangladesh 137 207 186 91
49 Opportunity Bank A.D. Podgorica Serbia 49 234 319 23
50 Sanasa Development Bank Sri Lanka 86 206 93 241
Source: Forbes Magazine (http://www.forbes.com/2007/12/20/microfinance-philanthropy-credit-biz-cz_ms_1220microfinance_table.html)
June 2009 | www.i4donline.net
35

www.eINDIA.net.in
5th
ns
tio
m ina 15
no rom ds
ne f r
AWARDS nli egin nwa
O b
Ju
neo
25 - 27 August 2009
Hyderabad International Convention Centre, India
Celebrating Innovative Initiatives and Exemplary Work in ICT!
eINDIA 2008 Award Winners with former Minister of Panchayati Raj and DONER,
Shri Mani Shankar Aiyar, former Member of Parliament, Shri Suresh Prabhu,
Secretary, DIT, Ministry of Communications and IT, Shri R Chandrashekhar and
Joint Secretary, Department of School Education and Literacy, Ministry of HRD,
Shri Subhash C Khuntia
Award Categories for Nominations in e-Governance Award Categories for Nominations in Digital Learning
• Government to Citizens Initiative of the Year • ICT Enabled School of the Year
• Government to Business Initiative of the Year • ICT Enabled University of the Year
• Government to Government Initiative of the Year • Government/ Policy Initiative of the year
• m--Governance Initiative of the Year • Civil Society/ Development Agency Initiative of the Year
• Civil Society/ Development Agency Initiative of the Year
Award Categories for Nominations in Telecentre
Award Categories for Nominations in e-Health
• Innovative Grassroots Telecentre of the Year
• Government/ Policy Initiative of the Year
• ICT Enabled Hospital of the Year • Civil Society/ Development Agency Initiative of the Year
• Government/ Policy Initiative of the Year
• Civil Society/ Development Agency Initiative of the Year
Award Categories for Nominations in e-Agriculture
Award Categories for Nominations in MunicipalIT • ICT Enabled Agricultural Initiative of the Year
• Government/ Policy Initiative of the Year
• ICT enabled Municipal Initiative of the Year • Civil Society/ Development Agency Initiative of the Year
For detailed information on eINDIA 2009 Awards, visit us at www.eINDIA.net.in/awards
Gautam Navin (+91-9818125257), gautam@csdms.in, Debabrata Ray (+91-9899650692), debabrata@csdms.in
Online Nominations at: www.eINDIA.net.in/awards

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India News
Nasscom wants to partner govt
for ‘inclusive’ growth
The apex body representing the Indian Technology (IT) industry, the National Association
of Software and Service Companies (NASSCOM) stated that it would like to work with the
government to bring about an inclusive (which benefits all sections of society) economic
growth agenda. NASSCOM President, Som Mittal stated that the industry and the
Information for development government would have to join hands to accelerate IT adoption in the government sector.
The IT-BPO industry has the potential to transform the country and play a major role in the
www.i4donline.net development of India’s key sectors, including education, healthcare, infrastructure, citizen
services and financial inclusion, thereby creating significant employment opportunities
across India, with a consequential impact on economic growth. NASSCOM and the
Samsung launches industry look forward to working closely with the government on this key agenda. The
solar-powered phone software body has also urged the government to extend availability of benefits under Sections
Samsung launched a low-cost solar-powered 10A/10B for units in the Software Technology Parks of India (STPI) and Export Oriented
mobile phone. The new handset, launched Units (EOU) to mitigate the impact of the recession and protectionist measures being
under its low-cost line of products Guru adopted globally. Another area of concern for the IT companies is the duplicity of indirect
at a price of Rs 2,799, has a solar panel on taxes for packaged software and policies for service tax refunds. Nasscom has requested the
the back, which can be used to charge the government to develop a uniform approach on transfer pricing and amend Fringe Benefit
battery anywhere the sun is shining. Tax (FBT) on employee stock options or ESOPs.
The phone, christened the Guru
E1107, can provide around 5-10 minutes
of talktime with one hour of solar charging earth at different points. These sensors its partners, are able to withstand severe
when the handset is turned off and sunlight will be attached to a wireless transmission droughts, tolerate higher temperatures and
has adequate intensity. According to the device, which will convert analog value mature early, enabling farmers to be ready
Country Head, Samsung India, solar into digital value and send the inputs to to meet the challenges of climate change
charging will give enough time to make few the base stations, which will be connected by cultivating the improved crops.
important calls when there is no electricity. to Amrita mutt’s Kollam campus. Experts According to William Dar, Director
The battery will attain full power with will be monitoring the inputs from the General of ICRISAT, the current research
about 40 hours of solar charging. base stations in real time and any unusual strategy at the Institute is to improve the
The handset, will be in shops by the behaviour or extreme value will trigger heat-tolerance and drought-resistance
end of this month. The company is also an alarm. qualities of ICRISAT’s mandate crops.
planning to introduce in India its solar- The fully tested model has become ICRISAT’s research is focused on crops
powered touchscreen mobile handset, Blue operational in Munnar, Kerala. The such as pearl millet, sorghum, chickpea,
Earth - unveiled at the GSMA Mobile system can be deployed in any part of pigeonpea and groundnut which are
World Congress in Barcelona, Spain early the country prone to landslides and snow important for the livelihood of the people
this year. avalanches. Besides, the application could in the dryland areas.
be put to industrial use for study of gas These crops have several natural
University develops wireless leakages or in conservation of forests evolutionary advantages for the global
tech to detect landslides by early identification of forest fires warming scenarios. Both pearl millet
Students of Amrita Vishwa Vidyapeetham during summer. As part of this project, and sorghum have high levels of salinity
University have developed a wireless representatives from various European tolerance, and hence are better adapted
network system for landslide detection, in partners like University of Rome, Selex to areas that are becoming saline due to
collaboration with European Commission Communications, Intracom Telecom, global warming.
and Indian Space Research Organisation Czech Centre for Science and Technology Some of the pearl millet varieties and
(ISRO). The technological breakthrough have arrived at the Amrita University to hybrids developed are able to flower and
system was developed as part of the research learn about the first-ever wireless sensor set seeds at temperatures of more than 42
project called, Wireless Sensor Network network system for landslide detection. degrees centigrade, in areas such as Western
with Self-Organisation Capabilities for Rajasthan and Gujarat in India. Improved
Critical and Emergency applications ICRISAT develops climate sorghum lines have also been developed
(WINSOC). Wireless panels with sensor change-ready varieties that are capable of producing good yields
nodes to read different parameters of the Improved crop varieties developed by the in temperatures of 42 degrees C, and have
soil, like moisture, vibration and movement International Crops Research Institute for stay-green traits that can enhance terminal
will be embedded 15 metres beneath the the Semi-Arid Tropics (ICRISAT), and drought tolerance.
38 i4d | June 2009

World News
NASA to grant $8 million for
climate change education
NASA announced that it will grant $8 million to fund educational projects on global climate
change. NASA aims to enhance students’ academic experiences and improve educators’
abilities to engage and stimulate their pupils in this field. The federal agency seeks proposals
for students of elementary, secondary, undergraduate and lifelong teaching and learning.
Information for development The funding opportunity supports NASA’s goal to engage students in the critical
disciplines of science, technology, engineering and mathematics. NASA called for projects
www.i4donline.net that improve teacher competency for global climate change education; strengthen teaching
and learning about climate change using NASA Earth system data and models; and enable
global climate change science research experiences for undergraduate or community
ITU establishes new college students and pre- or in-service teachers, including those in non-traditional teacher
study group to deal with licensure programmes.
climate change
International Telecommunication Union
(ITU) has established a Focus Group World Bank commits US$50 ties, which have been developed based on
on ICTs and Climate Change and will million for ICT in Nigeria the progress made through the e-Govern-
formalise the Focus Group’s output as The World Bank has agreed to commit nance initiative so far. The first strategic
ITU-T Recommendations including a US$50 million on ICT infrastructure priority focuses upon the development
methodology for evaluating the effects development, connectivity, skills develop- of capabilities and capacity. Civil servants
of ICTs on climate change both in direct ment and capacity building in Nigeria. will be trained with the relevant ICT skills
terms and how ICTs can reduce emission With the help of this investment, the to successfully implement e-government
in other industry sectors. Study Group 5 World Bank is hoping to achieve significant projects. Strategic Priority Two (SP2) will
was chosen as the lead study group and transformation in the region. focus on enhancing e-Governance through
will be renamed the Study Group on With the World Bank funding the reviewing, revising and developing policies
Environment and Climate Change to country will further consolidate its position and guidelines to allow for the effective
reflect its new mandate. SG 5 remains the as the hub of ICT development and the delivery of e-Government projects. Under
lead Study Group for protection against largest ICT market in Africa, which would this strategic priority, the legal framework
electromagnetic effects. Specifically SG 5 attract investment by international telecom will be updated to suit the e-Government
will work on documents related to: companies. The key intervention in Ni- initiative. Security and Trust in e-Gover-
1. Study of methodologies for calculat- geria includes connectivity, infrastructure nance will be the focus of SP3, as the neces-
ing the amount of greenhouse gases development and the outsourcing sector. sary infrastructure will be put in place to
(GHG) emissions from ICTs, and The bank has to date committed hundreds ensure that electronic transactions and ex-
the amount of reduction in the GHG of millions of dollars for the development change of information is kept confidential
emissions in other sectors as a result of ICT throughout Africa. and is conducted in a secure manner. ICT
of using ICTs. awareness programmes will be introduced
2. Creation of a framework for energy Brunei’s strategic plan to to educate all parties of the prevalent ‘cyber
efficiency in the ICT field, taking ac- achieve e-Governance risks’ and the precautions that ought to be
count of WTSA Resolution 73. Brunei has moved a step closer towards taken to minimise these threats.
3. Study of methodologies for power achieving e-governance with the launch Strategic Priority Four aims to integrate
feeding that effectively reduce power of a strategic plan that will map the way the ministries under a common network,
consumption and resource usage. to realising the initiative over the next five where government agencies will be able to
4. Study of methodologies that reduce years. The plan encompasses strategies such work together more effectively. ICT tools
environmental effects for ICT facilities as increasing human capacity in IICTs, and resources will also be standardised to
and equipment such as recycling. research and development of optimising ensure efficient and cost-effective use of
Essentially, the group will aim to see online services tailored specifically for these resources. These criteria fall under
that standards are developed in the most the public and improving connectivity the ambition of the realisation of a ‘one
appropriate way and that no duplication of between ministries. government’ network.
effort occurs. It will also provide a single Dubbed the e-Government Strategic Lastly, Strategic Priority Five calls for a
point of contact for ICT and Climate Plan 2009-2014, it addresses the needs of more convenient and efficient approach to
Change activities in ITU-T and seek col- the three main stakeholders, namely the online government services for the public.
laboration from external bodies working citizen, industry and government. The Wherever applicable, the public will have
in the field. plan is based on five key strategic priori- 24-hour access to these e-services.
June 2009 | www.i4donline.net 39

FAO-GTZ MICROBANKING SYSTEM FOR WINDOWS (MBWIN)
Technology for
microfinancing http://www.mbwin.net
The FAO-GTZ MicroBanking System is a software that is common functions.
aimed at managing a financial organisation’s client transactions An inbuilt report
in a comprehensive manner, maintaining it’s general ledger, and generator allows
at monitoring all operations. users to custom-
The system is the product of collaboration between the build reports to meet
Food and Agriculture Organisation of the United Nations their requirements.
(http://www.fao.org) and Deutsche Gesellschaft für Technische The report
Zusammenarbeit (GTZ) GmbH (http://www.gtz.de). generator has been
The FAO-GTZ designed to meet the
MicroBanking Customer Information File Screen basic internal and
System for Windows external reporting
(MBWin) is the requirements of most financial organisations. A product generator
successor of the allows the user to
older DOS-based setup and specify
FAO MicroBanking products without
System. The system the need of re-
has been designed programming
and developed for MBWin’s source
a wide range of code.
Loans Screen banks and financial For users who
intermediaries. With are looking forward
an eye on the varying needs of its prospective users, the software to migrating from
has been designed on a multi-tier architecture, which is scaleable the older version
and can be adapted to a variety of hardware configurations. It is of this software, Batch Data Entry Screen
modular in terms of applications and functionality. M BW i n h a s a
Carrying over features from the earlier version of the software, number of utilities which help with the migration of data,
MBWin has modules for translation of the system into new
current accounts, savings languages apart from assistance with
accounts, time deposits, the conversion of work from manual
share accounts and loan operation.
accounts that interface with The in-built MIS System allows
the general ledger module the user to consolidate and merge
(GL) and the contact branch level MBWin databases at the
information module (CIF). head office of the institution where the
The centralised CIF module system has been deployed. All reports
maintains comprehensive can be exported in many formats
information on corporate including MS Excel spreadsheets.
and individual customers, The full version of MBWin costs
guarantors and signatories, US$1500 for a single user and US$2000
and it has additional features for the first ten concurrent users.
for specialised microfinance MBWin Light (preconfigured for
System Configurator Screen
operators that deploy group a single user) is also available for
methodologies. US$500.
MBWin offers a classic user-friendly menu structure as A fully functional demo version of the software can be
well as a set of speed buttons for quick access to the most downloaded for free from their website.
i4d | June 2009
40

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD), INDIA
Banking for All www.nabard.org
The National Bank for Agriculture and Rural Development NABARD was established by an act of the Indian Parliament
(NABARD) was set up as an apex Development Bank with on 12 July 1982 to implement the National Bank for Agriculture
a mandate for facilitating credit flow for the promotion and and Rural Development Act 1981. It replaced the Agricultural
development of agriculture, small-scale industries, cottage and Credit Department (ACD) and Rural Planning and Credit Cell
village industries, handicrafts and other rural crafts. It is also (RPCC) of Reserve Bank of India, and Agricultural Refinance
mandated to support all other allied economic activities in rural and Development Corporation (ARDC).
areas, to promote integrated and sustainalbe rural development Some of the major activities of the bank since it’s inception
and secure prosperity of rural areas. are as follows:
In order to facilitate rural prosperity, NABARD: • Preparing of Potential Linked Credit Plans for identification
• Provides refinance to lending institutions working in rural of exploitable potentials under agriculture and other activities
areas available for development through bank credit.
• Brings about and promotes institutional development • Refinancing banks for extending loans for investment and
• Evaluates, monitors and inspects the client banks and lending production purpose in rural areas.
institutions • Providing loans to State Government/NGOs/Panchayati Raj
Apart from these functions, NABARD also acts as a co- Institutions (PRIs) for developing rural infrastructure.
ordinator in the operations of rural credit institutions, assists the • Supporting credit innovations of NGOs and other non-
government, the Reserve Bank of India and other organisations formal agencies.
in matters pertaining to rural development, offers training and • Extending formal banking services to the unreached rural
research facilities to banks, co-operatives, and organisations poor by evolving a supplementary credit delivery strategy
working in the realm of rural development and helps the state in a cost effective manner by promoting Self Help Groups
governments in achieving their targets of providing assistance to (SHGs).
institutions in agriculture and rural development. • Promoting participatory watershed development for
NABARD also acts as a regulator for co-operative banks and enhancing productivity and profitability of rainfed agriculture
Regional Rural Banks (RRBs). in a sustainable manner.
• On-site inspection of cooperative banks and RRBs and off-
site surveillance over health of cooperatives and RRBs.
Some milestones NABARD and microfinance
1. Refinance disbursement under ST-Agri & Others and MT- Headquartered in Mumbai, India, the Bank conducted a series of
Conversion/ Liquidity support aggregated INR 16952.83 crore
research studies in association with MYRADA (a leading NGO
during 2007-08.
from South India) and independently during the early eighties.
2. Refinance disbursement under Investment Credit to commercial
banks, state cooperative banks, state cooperative agriculture These studies showed that despite having a wide network of rural
and rural development banks, RRBs and other eligible financial bank branches implementing poverty alleviation programmes and
institutions during 2007-08 aggregated INR 9,046.27 crore. self-employment opportunities through bank credits for almost
3. Through the Rural Infrastructure Development Fund (RIDF) two decades, a very large number of the poorest of the poor
Rs.8034.93 crores were disbursed during 2007-08. With this, a continued to remain outside the formal banking sector. These
cumulative amount of INR 74,073.41 crore has been sanctioned studies indicated that the existing banking policies, systems,
for 2,80,227 projects as on 31 March 2008 covering irrigation, procedures and financial products were not well suited to meet
rural roads and bridges, health and education, soil conservation, the needs of the poor. It appeared that what the poor needed was
drinking water schemes, flood protection, forest management etc. better access to these products and services and not just cheap,
4. Under Watershed Development Fund with a corpus of INR 613.71
subsidised credit.
crore as on 31 March 2008, 416 projects in 94 districts of 14 states
After these studies, a need was felt for alternative policies,
have benefited.
5. Farmers now enjoy hassle free access to credit and security through systems and procedures, savings and loan instruments and new
714.68 lakh Kisan Credit Cards that have been issued through a service delivery mechanisms that would fulfill the requirements
vast rural banking network. of the target group especially the women. Therefore, the emphasis
6. Under the Farmers’ Club Programme, a total of 28,226 clubs was on improving access to microfinance instead of just micro-
covering 61,789 villages in 555 districts have been formed, helping credit. To this end, NABARD considers the launch of its pilot
farmers get access to credit, technology and extension services. phase of the SHG Bank Linkage programme in February 1992,
a landmark development in banking for the poor in India. The
June 2009 | www.i4donline.net
41

SHG-informal thrift and credit groups of the poor came to be • maintain expert staff to study all problems relating to
recognised as bank clients under the pilot phase. The strategy agriculture and rural development and be available for
deployed for this programme involved forming small, cohesive consultation to the Central Government, the Reserve Bank,
and participative groups of the poor and encouraging them to the State Governments and the other institutions engaged
pool in their thrift regularly which will be used to make small in the field of rural development.
interest-bearing loans to members and learning the nuances of • provide facilities for training, for dissemination of information
financial discipline in the process. Apart fromt his approach, and the promotion of research including the undertaking of
NABARD also took a conscious decision to experiment with studies, researches, techno-economic and other surveys in the
other successful models such as replicating the Grameen model, field of rural banking, agriculture and rural development.
financing NGO-MFIs, etc. • provide technical, legal, financial, marketing and
The Bank commenced a nationwide Pilot Project in 1992 administrative assistance to any person engaged in agriculture
aimed at promoting and financign 500 SHGs across the coutnry. and rural development activities.
The SHG-bank linkage strategy includes financing of SHGs • may provide consultancy services in the field of agriculture
promoted by external facilitators like NGOs, bankers, government and rural development and other related matters in or outside
agencies and individuals as also promotion of SHGs by banks and India, on such terms and against such remuneration, as may
fonancing SHGs directlyby banks or indirectly where NGOs and be agreed upon.
similar organisations act as financial intermediaries. The pilot was In this context, the role of training in NABARD and the
followed by the settign up of a Workign Group on NGOs and role played by it for capacity building in client institutions,
SHGs by the Reserve Bank of India in 1994 which gave a number partner agencies and other developmental agencies is important.
of recommendations on the internalisation of the SHG concept as For maintaining ‘Expert Staff ’, the Bank needs to provide
an intervention tool in the area of banking with the poor. Based continuous exposure to its officers and staff for upscaling their
on the pilot and the recommendations of the Working Group, knowledge and skills in core areas. In the initial years the Bank
NABARD, in 1998 crystallised its vision for providing access to had recruited expert staff from various technical disciplines and
one third of the rural poor by linking 1 million SHGs by 2007. created a separate cadre of officers. These officers were involved
This target was achieved in the year 2004 by massive scaling up in formulating, appraising, monitoring and evaluating different
of the training and capacity building awareness programmes agricultural projects implemented by different credit agencies.
by NABARD covering a large number of officials and staff of These officers, irrespective of their academic background, were
NGOs, banks, government agencies and rural volunteers in SHG imparted similar type of training as all other officers. Their
promotion, nurturing, appraisal and financing. placements and the regular job rotations helped in grooming
them to take up assorted assignments, get involved in a
variety of roles and functions including credit, developmental,
Highlights of SHG bank linkage programme promotional, supervisory and necessary support and information
(as on 31 March 2006) for decision making.
In pursuance of the Bank’s mandate as stated in the Act, the
• During the period April 2005 to March 2006, 620109 new Bank provides training facilities for the RFIs and agencies involved
SHGs were financed by banks to the tune of Rs 44.99 billion
in rural development through the Bankers Institute of Rural
by way of loans. Cumulatively, banks have lent Rs 113.97
billion to 2238565 SHGs.
Development (BIRD), Lucknow and the two Regional Training
• NABARD has extended a refinance of Rs 10.68 billion to Centres in Bolpur and Mangalore. With a view to broadbase the
banks during 2005-06 bring the cumulative refinance amount training and capacity building efforts, the Bank encourages the
to Rs 41.60 billion. Regional Finance Institutions to set up their own training systems
• 44362 branches of 545 banks (Commercial banks- 47; Regional and provides these training institutes the necessary support to
Rural banks-158; & Cooperative banks - 340) situated in 583 conduct meaningful and quality training. The bank continuously
districts in 30 states of the country are participating in the examines the options and avenues for strengthening the training
programme. interventions at the client level so that the human resources
• About 32.98 million poor households have gained access in these institutions are developed to take on the challenges,
to formal banking system through SHG bank linkage reckon with the competition, improve customer service, expand
programme.
outreach, develop suitable products and thereby contribute to
• Nearly 90% of the groups are women groups.
rural development.
As NABARD primarily functions through other agencies, the
needs of the client institutions largely determine the knowledge
Developmental mandate of NABARD and skill requirements of NABARD officers. The Bank endeavours
The provisions of the NABARD Act, 1981 clearly indicate the to blend the experiences of client bank training with the training
nature and scope of the developmental mandate of the Bank and for NABARD officers so as to make training meaningful
its role in training and capacity building with the underlying and relevant to their roles. Efforts are also made to blend the
belief that the process of development cannot be accomplished by study findings with the outcome from training to periodically
credit/refinance alone. Section 38 of the NABARD Act provides measure the overall impact of the investments made in the
that the Bank shall: training efforts.
i4d | June 2009
42

RENDEZVOUS
RENDEZVOUS: GLOBAL CONFERENCE ON FINANCING THE POOR: MOVING BEYOND INCLUSION, MICROFINANCE
CONNECT, 29 DECEMBER 2009, NEW DELHI, INDIA
Exploring the Impact
of Microfinance
As the world is in the grip of a global fi- processes, discuss the past attempts, issues of capital. The clients require safety, trust,
nancial recession which has a far reaching and impediments in enhancing impact and convenience and access of information; an
impact on the development process across present the concept and objectives of the MFI needs technology for cost effectiveness
the world the poor are most vulnerable Global Microfinance Impact Alliance. and process automation; Loan Officials
and the most affected by such crisis as they More than 150 delegates from MFIs need information sharing, and efficient
have very limited capacity to cope with the and NGOs, banks and financial institu- transaction, IT facilitates all such services.
recession. Microfinance which is an effec- tions, apex bodies and networks, advocacy He believes that advanced technology is
tive tool of poverty eradication, capacity and support institutions and researchers going to play an important role in future
building, social empowerment, also seems and students participated in the con- development of microfinance industry as
to be affected by the financial crisis as the clave. Representatives from the World its application will bring down the trans-
interest rate increases and credit squeezes. Bank, European Commission, Grameen action cost and helps in management too.
Realising the significance of the current sce- Foundation, Sonata Finance, Oikocredit, Therefore, technology is related to every as-
nario, a Global Conclave of Microfinance Unitus Capital, Plural India, Centrer for pect of the microfinance system and is very
Connect on 'Financing the Poor: Moving Microfinance, Michael and Susan Dell crucial for it’s control and regulation. He
beyond Inclusion' was organised on 29th of Foundation, Infrasoft Tech, GRAMAUS is of the opinion that advanced IT-enabled
April, 2009 at The Park Hotel, New Delhi, Bangladesh, ASA Initiative Ghana, Sri- system is required for providing new kind
India. The theme of this conclave was to krishna Institute of Management were the of banking services such as mobile banking
look at the emerging new dimensions of panelists for the conclave sessions. The and branchless banking, etc.
the microfinance movement in the cur- event was sponsored by Infrasoft Tech, a In her inaugural address, Ellen Pender-
rent global scenario. Traditionally, banks leading software company for the banking sen, European Union discussed the experi-
or Microfinance Institutions (MFIs) had and finance industry. Sambodhi Research ences of the European Union in assessing
offered small lendings/credits which had and Communications was the knowledge impacts of microfinance projects. She stat-
been perceived as a tool for poverty allevia- partner and Microfinance Insights was the ed that relevance, efficiency, effectiveness
tion and reduction of financial exclusion media partner. and impact were four criteria on which a
- bringing the poor and unbanked in the In his welcome address, Kultar Singh, project’s performance was evaluated by the
mainstream of financial services and social CEO, Sambodhi accentuated the need to Union. Mohini Malhotra, South Asia Re-
empowerment of the weaker sections of assess impact and outreach of microfinance gional Coordinator, World Bank Institute,
the society. Now, the microfinanace sector on the lives of the poor and the need to pointed out that cost effectivenes, lower
has been transformed. It has become more think beyond the traditional aspect of the interest rates and user friendly technologies
diversified, commercialised, and competi- microfinance movement. He pointed out hold the key for success of microfinance
tive and has grown bigger than ever before. that it only requires a small effort to reach movement. In the particular context of
MFIs have moved beyond credit to offer the poor and provide livelihood to them. India, she stated that we had come a long
insurance and savings products. Hence, it He also asserted that despite the current way but there still is a lot to do as we have
is pertinent to address the new paradigm global recession, the microfinance sector covered less than five per cent of the rural
shifts and scale the impact and outreach would grow exponentially and it had the households of the country. She quoted the
of the microfinance sector and assess the potential to reach 80-82 million people remarkable success of Bangladesh, where
role of new actors in the changing process. by 2010-12. Hanuman Tripathi, MD, around 40 per cent households have access
The Global Microfinance Connect Con- Infrasoft Tech discussed about the multiple to banking services.
clave 2009 provided a platform to share applications of IT software in the delivery Other key speakers were Geeta Goel
the practical experiences from the field on of microfinance services and to assess its (Michael and Susan Dell Foundation),
impact of microfinance operations, pres- impact. From the donor point of view, IT Justin Oliver (Centre for Microfinance,
ent the key assessment methodologies and is required for transparent and smooth flow Institute for Financial Management and
June 2009 | www.i4donline.net
43

Research, Chennai), Chandni Ohri (Grameen Foundation), beyond traditional dimensions of microfinance to a more results,
A Ramanathan (Ex-Chief General Manager, NABARD), Md outcomes and impact-focused approach, secondly, a shared un-
Abdul Khaleque, Suvarna Rani Gandham (India Regional derstanding also emerged during the meeting that there is need
Manager, Oikocredit and Managing Director Maanavaveeya of methodologies for the impact assessment of microfinance
Holdings), Ashish Gupta (Sonata Finance), Eric Savage (Unitus operations. Thirdly, the conclave also emerged as a platform for
Capital), N V Ramana (Ex-CEO BASIX group), Shivendra promotion and dissemination of knowledge and information
Sharma (Executive Director, Plural India) and Veronica Agodoa regarding microfinance projects and services among different
Kitti (Managing Director, ASA Initiative, Ghana). During the societies and at various levels around the world, for instance, a
day long deliberation, all delegates shared their field experiences 20 minutes film and a photo exhibition were displayed showcas-
on impact of microfinance operations, assessment findings and ing impact of microfinance of various organisations from India,
methodologies, issues and challenges. Chandni Ohri introduced Nepal, Peru, Ghana, Philippines and Cambodia.
the Grameen Foundation’s Progress out of Poverty Index (PPI), Last but not the least the conference concluded with an
and how it can be used as both a management and a measure- award ceremony celebrating the best practices in microfinance
ment tool. She explained that it allows MFIs to better determine operations across the world. And the winner of the first Global
their clients’ needs, which programmes are most effective, how Micro Finance Impact Awards 2009 was Amhara, Credit and
quickly clients leave poverty, and what helps them to move out Saving Institution of Ethiopia, and BISWA from Orissa, India
of poverty faster. Gandham suggests that a “one-time touch and was awarded Forerunner.
go” policy is not what MFIs should aim for, a permanent access to Today microfinance is not seen as a charity business. Due to
credit is needed for development and empowerment. She argued it’s commercialisation and product diversification it has become a
that social impacts of microfinance were remarkable, particularly profitable business venture and MFIs are transforming themselves
in rural areas of India. It has changed the attitude of the men in from non-profit organisations to profit making organisations. We
a family towards women. The microfinance movement is bring- should keep in mind the fact that the prime motto of MFIs should
ing hope, prosperity, a sense of security and progress to many of not be profit making but to change the financial system to make
the poorest people across the world. She feels that microfinance it all-inclusive. To take full advantage of microfinance, it is crucial
approaches for the poor are a necessary ingredient in poverty al- for the industry to continue to innovate, evolve and bring more
leviation, empowerment of the weaker sections of the society, and economically active poor in its ambit. To this end, interaction
to end their financial inclusion but suggests that sustainability and among intelligentsia and the practitioners for knowledge sharing
affordability of MFIs are quite important for their success. Ashish and assessment of new trends are necessary. The conclave which
Gupta introduced the study report of MiRacle software which is a is slated to be an annual event seems to be an appropriate forum
pilot impact assessment and rating and practitioner-friendly tool for promotion and dissemination of knowledge and expansion
for assessing client level impact. He shared his experiences of north of the microfinance sector which provides economic lifeline for
India, particularly Uttar Pradesh and Madhya Pradesh. millions of poor across the world.
The main outcomes of the conclave were the beginning of the Dinoj Kumar Upadhyay
Global Impact Alliance that would further the agenda of moving dinoj@telecentremagazine.net
WNS receives the 2009 Golden Peacock Award
WNS (Holdings) Limited has been awarded the 2009 Golden Peacock Eco-Innovation
Award for its Green Lean Sigma Programme by the World Environment Foundation, in
association with the Institute of Directors.
WNS, a leading provider of global business process outsourcing (BPO) services, was
recognized by a distinguished panel of judges for its organization wide initiative, aimed to
make WNS a carbon neutral company leveraging Six Sigma, LEAN and ISO methodolo-
gies. This effort was led by Shubra S Sachdev, Associate Vice President, Business Process
Excellence and Transformation and Ujjwal Majumdar, Chief Quality Officer.
The Golden Peacock Awards (GPA) is a set of prestigious national and global awards
designed to improve productivity and quality in organisations. It aims to promote business
excellence by providing a Framework or Criteria for assessment that is based on similar principles as other awards throughout the
world. The Golden Peacock Awards jury is chaired by Justice P N Bhagwati, former Chief Justice of India and Member, UN Hu-
man Rights Commission. The jury is comprised of distinguished personalities from the business, political, regulatory and academic
communities, including, among others, Right Honorable Joe Clark , Former Prime Minister of Canada; Ola Ullsten, Former Prime
Minister of Sweden; Olivier Giscard d’Estaing, Founder and MD, INSEAD; James McHugh CBE, Former Chairman, British Gas;
James McRitchie , Publisher Corporate Governance, California; Prof Viviane de Beaufort, Essec Business School, France; Justice
M N Venkatchaliah, Former Chief Justice of India and Chairman, Institute of Directors; Gauri Kumar, Director General, NIFT;
and Rakesh Bharti Mittal, Vice Chairman and Managing Director, Bharti Teletech.
i4d | June 2009
44

3-4 November 2009
What’s on
4th International Conference on E-
Commerce
Penang
http://ecdcconference.com
Africa 13-18 July 2009 Singapore
28-30 October 2009 Media, Democracy and Governance: 26 August 2009
IDIA2009 Conference Emerging Paradigms in a Digital Age International Conference on Energy and
South Africa New Delhi Environment (ICEE 2009)
http://www.amic.org.sg/new/news_n_updates/ http://www.waset.org/wcset09/singapore/icee/
http://www.developmentinformatics.org/conferences/
2009/3rd.html conf2009cfp.htm
18-20 August 2009
14-16 September 2009 Map Asia 2009
Australia Indian Environment Summit 2009 Suntec Singapore International
15-18 November 2009 New Delhi Convention & Exhibition Centre
2009 Asia Pacific Conference on Child http://www.iesummit.net/ http://www.mapasia.org
Abuse and Neglect
Perth, Western Australia 9-11 September 2009 14-16 September 2009
http://www.napcan.org.au National Seminar on “ICT for Agriculture Outlook Asia 2009
Agriculture and Rural Development” Grand Hyatt
20-25 March 2010 Pasighat, Arunachal Pradesh http://www.terrapinn.com/2009/agriasia
World Congress of Internal Medicine http://www.modelevillage.in
Melbourne, VIC Thailand
http://www.wcim2010.com.au/ Japan 4-6 October 2009
24-28 August 2009 3rd Vaccine Global Congress
Bangladesh The 3rd International Symposium Bangkok
17-19 December 2009 on the Environmental Physiology of http://www.vaccinecongress.com
International Conference on the Ectotherms and Plants
Developments in Renewable Energy Tsukuba United States
Technology http://www.nias.affrc.go.jp/anhydrobiosis/isepep3/ 4-7 October 2009
Dhaka index.html HighEdWeb 2009: Open. Connected
http://www.icdret.uiu.ac.bd Milwaukee, WI
Malaysia http://www.highedweb.org/2009
Europe 6-9 July 2009
31 August–4 September 2009 26-30 October 2009
6th International Conference on IT in
World Climate Conference-3 mLearn 2009 - 8th World Conference on
Asia 2009
Geneva, Switzerland Mobile and Contextual Learning
Kuching, Sarawak
http://www.wmo.int/pages/world_climate_conference/ Orlando, Florida
http://www.cita09.org
index_en.html http://mlearn2009.org
31 August-3 September 2009 28-30 October 2009
Sustainable Energy Technology International Conference on Information
(SET) 2009 Technology (ICIT 2009)
North Rhein Westfalia, Germany Chicago
knowledge for change
http://www.set2009.org http://www.waset.org/wcset09/chicago/icit/
22-23 October 2009
Gender, Media and the Public Sphere United Kingdom
Coimbra, Portugal 29-30 June 2009
http://mediagender.wordpress.com/
European Conference on e-Government
London
http://academic-conferences.org/eceg/eceg2009/eceg09-
India
home.htm
16-18 July 2009 25 - 27 August 2009
20th Skoch Summit - Banking, 28-29 September 2009
Financial Services and Insurance
Hyderabad, India
Energy From Waste
Mumbai, Maharashtra London
http://corporate.skoch.in/index.php?option=com_cont
http://www.eINDIA.net.in/2009/
http://www.smi-online.co.uk/events/overview.
ent&view=article&id=165&Itemid=209 asp?is=5&ref=3142
June 2009 | www.i4donline.net 45

IN-FACT
Microfacts about
microfinance
• In Africa, women account for more than
60 per cent of the rural labour force and
contribute up to 80 per cent of food
production, yet receive less than 10 per
cent of credit provided to farmers.
• The World Bank estimates at there are
now over 7000 microfinance institutions,
serving some 16 million poor people in
developing countries. The total cash
turnover of MFIs worldwide is estimated
at US$2.5 billion and the potential for
new growth is outstanding.
• There is concern that official assistance
will be diverted from vital primary care
aid programmes such as health, water
projects and education into MFIs, owing
to their popularity among donors.
• Though women appear to benefit most,
studies indicate that many loans awarded
to and paid back by women are in fact
used by men.
• The widely-imitated Grameen Bank in
Bangladesh aims to provide credit to those with individuals and families with credit from Grameen Bank,
in extreme poverty. Some 94 per cent of those who meet more than 48% rose above the poverty line.
the bank’s criteria and take up loans are women. Grameen • It is estimated that worldwide, there are 13 million
borrowers keep up repayments at a rate of around 98 per microcredit borrowers, with USD 7 billion in outstanding
cent. The Bank lends US$30 million a month to 1.8 million loans, and generating repayment rates of 97 percent. It has
needy borrowers. been growing at a rate of 30 percent annual growth.
• Savings are important both as a vital safety net for the poor • Fewer than 2 per cent of poor people have access to financial
and as a source of funding that does not rely on external services (credit or savings) from sources other than money
sources. Many strong MFIs, notably in Africa, recycle the lenders.
savings of needy clients as a principal source of loan funds • Under 10 million of the 500 million people who run micro
for their customers. and small enterprises have access to financial support for
• The Microcredit Summit estimates that US$21.6 billion their businesses.
is needed to provide microfinance to 100 million of the • There is a potential demand for microcredit services from
world’s poorest families. The Summit planners say it should seven million borrowers.
be possible to raise US$2 billion from borrowers’ savings • There is a potential demand for microsavings services from
alone. The final figure may be even higher. 19 million savers.
• Studies have shown that during an eight year period, among • The world’s seven richest men could wipe out global poverty.
the poorest in Bangladesh with no credit service of any type, Their combined wealth is more than enough to provide the
only 4 percent pulled themselves above the poverty line. But basic needs of the poorest quarter of the world’s people.
Source: Hari Srinivas, The Global Development Research Centre (GDRC), http://www.gdrc.org/icm/data/d-snapshot.html
46 i4d | June 2009

www.i4donline.net
i4d invites feature articles on 'mobiles 4 development'
The August 2009 issue of i4d magazine focuses on 'mobiles 4 development'. We encourage a wide
variety of submissions on the topic areas outlined below:
! Rural connectivity
! Financial inclusion through mobile phones
! Education through mobile phones
! Assisting farmers through mobile technologies
! m-Health: Healthcare through mobiles
An ideal feature article (two-pager) should be between 1400-1600 words. Case studies should be
between 1600-2200 words. Graphs, charts, tables and pictures should be sent separately in high-
resolution (300 dpi or more) .jpeg, .tif or .bmp format. Along with the manuscript, authors/contributors
should submit their brief profile and photograph.
Submission deadline is 10 July 2009. e-mail all submissions to subir@csdms.in

TM